the early months of presidential administrations with historians, authors and through the c-span archives. we will look at accomplishments and setbacks and examine how events impacted presidential terms and the nation up to the present day. this saturday, the first 100 days of ulysses grants presidency. grant was a famous civil war general who won the white house in 1868. his campaign slogan was "let us have peace." issues during his first 100 days included reconstruction, civil war debt, voting rights and the fight against the kkk. watch first 100 days, saturday at seven :00 p.m. eastern on american history tv on c-span2. >> c-span, democracy unfiltered. we're funded by these television companies and more, including mediacom. >> nearly 30 years ago, mediacom

was founded on a powerful idea, bring cutting edge ride to underserved communities. we connected 850,000 miles of fiber. our team broke speed barriers, delivered one gig speeds to every customer, and now with mediacom mobile is offering the fastest, most reliable network on the go. decades of dedication, decades of delivery. decades ahead. >> c-spasupports mediacom as a public service, along with these other television providers, giving you a front row seat to democracy. the chair of the federal reserve gave lawmakers an update on the u.s. economy, noting activity in the housing sector seem to have stabilized and the labor market appears to be solid with unemployment at 4%. he also talks about ablation which remains about the federal reserve's 2% goal. question about whether president

trump's plan for massive deportation could impact the economy. this is three hours. without objection, all members will have five legislative days in which to submit strain's materials to the chair for inclusion in the record. i went out that in the outset of this hearing has a hard stop at 1:00 p.m. which we will observe. i'll never recognize myself for four minutes for an opening statement. oh come, chairman powell, thank you for being with us today. for the last four years inflation has crushed americans, today takes a dollar $.21 to purchase what just cost a dollar in january 2021. as measured by the consumer price index. erosion of america's incomes and

thereby their savings was caused by commendation of irresponsible fiscal policy, supply chain disruptions, and also by in my view of federal reserve fighting the last war, staying too low for too long. chairman powell, unite discussed that previous hearings of the fed like many others assume that the pre-pandemic era of low inflation and low interest rates would maintain. seven on's before inflation began his four decade steep march upward in march of 2021. in hindsight, the adoption of the so-called flexible inflation targeting appears ill-timed and ill fitted for post-pandemic world. as the fed undertakes a review of its monetary policy framework, you must account for the lessons of the last four years and think about what's ahead over the horizon, not what has been.

the fed has made progress on inflation but the last mile seems the hardest, as the bank of america, said yesterday, inflation is stuck above target with risks to the upside. in august 2022, with inflation region, you gave a speech that echoed some of your predecessors as chair. you vowed to keep at it until we are confident the job is done. it is a value should fulfill. with this morning's confirmation that inflation is well above the 2% target and 3% and making a move upwards, other economic indicators are positive. as you reported yesterday, allowing for raisman -- and patient rate, solid gdp growth and financial conditions continue to support expansion and investment. this is not a time to say there are no risks but some perhaps unseen. however, these risks in comparison to the risk of a resurgence of inflation present or modest, given the already high prices due to president

biden's inflation, american simply cannot afford further price increases at the grocery store and gas pump. such a resurgence would likely force the fed to begin another tightening cycle picking more just, credit cards and small business loans and -- unattainable for many. that's why urge the fed to forge ahead with its monetary policy duties until you're confident the mission is complete and price stability has been restored. the fact is over the past decade we've witnessed too many distracting additional mandates diluting the fed's core mission of -- economic prosperity that will be led by frank lucas. the purpose is to ensure the monetary policy actions of the fed are put under a magnifying glass and prioritized for this committee. and i look forward to our first hearing of the task force. i now want to turn to some of the other fed responsibilities,

bank regulation and supervision. the fed was created by congress to be an independent agency, the intent is to insulate the federal reserve's monetary policy from political influence. unfortunately in the last 2.5 years of the biden administration, the fed took on serious liberties with its independence in the area of supervision. the federal vice chair for supervision is to develop policy recognitions that their been brought to the board of governors. in my estimation the years you and the board have been to deferential to the statutory vice chairman for supervision. the fed has a chance right now to get back on the right track and preserve its independence for the long-term benefit of the american people. with that i yield back.

>> the chair recognizes mr. lucas for one minute. >> thank you, mr. chairman. a partisan guiding principle has been maximizing economic prosperity. it's the single greatest factor in delivering opportunity in improving the quality of life for folks back home. the actions of the federal reserve and the machinery of monetary policy play an important role in economic stability, with the five-year review of monetary policy framework underway, hope this would be an opportunity to evaluate the effectiveness of the feds toolkit and its vast influence on the lives of every american. the creation of the new monetary policy treasury market resilience, and economic austerity task force will afford us the opportunity to dive deeper into this topic. chairman powell, thank you for being here. there are real issues that deserve our attention and i hope that today will be productive. i look forward to hearing your testimony on the state of the economy, where we are at and where we are headed. i go back, mr. chairman.

>> the chair recognizes mr. vargas for one minute. >> thank you very much, mr. chairman and thank you ranking member. and thank you, chairman powell, both for your years of public service and for appearing before our committee today. as a ranking member of the new form monetary policy treasury market resilience and economic prosperity task force, look forward to working chairman lucas and the rest of my colleagues to address these important issues. the research is clear. independent central banks perform better in carrying out their mandates than politically motivated central banks. the independence of the federal reserve is crucial to achievement of this dual mandate goals to maintain both maximum employment and stable prices. though this dual mandate has been criticized by some, it continues to serve americans well. it is not prevented the fed for making substantial progress on driving down inflation. all the while avoiding a recession which many saw as

inevitable. i look forward to your testimony and i yield back. xo like to turn to the gentleman from michigan and yield to him for point of personal privilege. a thank you, chairman neal, and as we all know, all good things must come to an end. i want to take a minute to recognize someone who is leaving the committee but has been an integral part of the oversight work republicans have done over the last five years. although nicole bow is all of 29 or so, something we tease her about on fairly regular basis, i quickly realize that despite her physical stature, she was a force to be reckoned with. her dedication to my team, this committee, her colleagues and this institution or something we all should aspire to achieve. nicole has effectively served in various roles from professional

staff member right out of law school to now deputy general counsel in this particular congress. her time with the committee him and nicole has worked on or lead investigations into sam bankman-fried, the bank collapses of 2023, terrorist financing, culture and corruption at the fbi see and the sec's climate disclosure rule, just to name a few. i've sat through her questioning and it's fierce and tenacious and erected. i self, my team and frankly the whole financial services committee team can't thank nicole enough for her work and what she has done on behalf of this organization, and like all good staffers, she has become a confidant, a sounding board, has the ability to say no in a very nice way, but in a very tough way as well. although nicole will be leaving the committee, or contributions will not be forgotten and are deeply cherished. so thank you, nicole, we deeply appreciate all your work and

you. [applause] >> mr. chairman, we welcome your testimony, chairman powell, you will we recognize for five minutes to give an oral presentation of her testimony. without objection written statement will be made part of the record. you are now recognized for five minutes. >> i appreciate the opportunity to present the federal reserves semiannual monetary policy report. the federal reserve remains squarely focused on achieving our dual mandate goals of maximum employment and price stability to benefit the american people. the economy is strong overall and has made significant progress toward our goals over the past two years. conditions have cooled from their formally overheated state rain solid. inflation has moved much closer

to our 2% goal remain somewhat elevated. there are risks to both sides of our mandate. we will review the current economic situation before the monetary policy. recent indicators suggest that economic activity has continued to expand at a solid pace. gdp rose 2.5%. >> is to chairman, can we ask you to pull your microphone a little closer? thank you. >> recent indicators suggest economic activity has continued to expand at a solid pace. gdp rose 2.5% in 2024, bolstered by resilient consumer spending. investment in equipment and intangibles appears to have declined in the fourth quarter and was solid for the year overall. following weakness in the middle of last year, to be in the housing sector seems to have stabilized. in the labor market, conditions remain solid and appear to have stabilized.

following earlier increases the employment rate has been steady since the middle of last year and at 4% in january remains low. nominal wage growth has eased over the past year and the jobs to workers gap has narrowed. overall a wide set of indicators suggest that conditions in the labor market are broadly in balance. the labor market is not a source of significant inflationary pressures. strong labor market conditions in recent years have help narrow long-standing disparities in employment across demographic groups. inflation has eased significantly over the past two years but remain somewhat elevated relative to our 2% goal. prices rose 2.6% in the 12 month ending in december, corp. ecu prices rose 2.8%. longer-term inflation expectations appear to remain well anchored as reflected in a

broad range of surveys as well as measures -- are monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the american people. since september, the fomc lowered the policy rate by four percentage point from its peak after having maintain the target range for the federal fund rates at five point when he 5%-five .5% for 18 months. that recalibration of a policy stance was appropriate with the cooling of the labor market. meanwhile we continue to reduce our securities holdings. with our policy stance now significantly less restricted than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance. we know that reducing policy restraint too fast or too much that hinder progress on inflation. at the same time, reducing

policy restraint too slowly or too little could unduly weaken economic activity and employment. in considering the extent and timing of additional adjustments to the target range for the federal funds rate, the fomc will assess incoming data, the evolving outlook and the balance of risks. as the economy evolves, we will adjust our policy stance in a manner that best promotes our maximum employment and price stability goals. if the economy remain strong and inflation is not continue to move sustainably toward 2%, we can maintain policy restraint for a longer. if the labor market were too weaken unexpectedly or if inflation were to fall more quickly than anticipated, we can ease policy accordingly. we are attentive to the risks to both sides of our dual mandate policy is well-positioned to deal with the risks and uncertainties that we face. this year, we are conducting our second periodic review of our monetary policy strategy tools and medications. the framework used to pursue are

congressionally assigned goals. the focus of this review is on the fomc statement on longer run goals and monetary policy strategy which articulates the committee's approach to monetary policy and on the committees policy committee case and stools. the committees to percent longer run inflation goal would be retained and will not be a focus of our review. our review will include outreach and public events involving a wide range of parties including fed listens events around the country and a research conference in may. we will take on board the lessons of the last five years and adapt our approach where appropriate to best serve the american people to whom we are accountable. we intend to wrap up the review by late summer. let me conclude by emphasizing that the fed will do everything we can to achieve the dual mandate goals congress set for monetary policy. we remain committed to supporting maximum employment and bringing ablation sustainably to our 2% goal in keeping longer-term inflation expectations well anchored.

our success in delivering on these goals matters to all americans. we understand that her actions affect communities, families, and businesses across the country. everything we do is in service to our public mission. think you, and i look forward to your questions. quick someone to recognize mrs. water some california for a four-minute opening statement. >> good morning, everyone. welcome chair powell, our countries on the precipice of an economic disaster unlike anything we've seen in recent memory, while trump promised lower prices for working-class families, we are seeing the exact opposite. in fact, roastery prices are rising. according to the labor department, eggs are up 40%, more expensive than they were even a year ago. in my homestead of california, we've seen eggs as high as nine dollars and more for a dozen. inflation is rising and it is up to 3% for the first time since

june. other staples were about to get more expensive, as trump levies new taxes on steel and aluminum. america's consumers and businesses are facing uncertainty and chaos. this is all because trump and his unelected billionaire copresident elon musk are taking a sledgehammer to our economy and democracy. in recent days, they attempted to illegally kill the consumer financial protection bureau, the same agency created after the financial crisis of 2008. since its inception, cfpb has successfully fought on behalf of working-class families against the abuse of big banks, predatory lenders, and not to mention returned $21 billion back to families who were

swindled. chair powell, you explain yesterday that with the cpap shut down there is no agent teaches supervised big banks to ensure that follow consumer finance laws. in the face of these illegal cruel and relentless attacks, cherry hill, it is both urgent and critical that you immediately convene a long-overdue hearing with cfpb acting director, members of congress, and importantly, the american public deserves answers as to why musk and his doge minions are in possession of sensitive consumer information and what they are doing with it. additionally, trump is simultaneously threatening import taxes on u.s. companies that will increase the cost of groceries and other basic supplies for all. trump is freezing funds, housing

assistance and community development and whittling down the federal workforce so that his billionaire boys club can sucked any of these workers salaries into their own pockets. this is all part of the project 2025 playbook. you know what else is taken from project 2020 five, chair powell? their plan to eliminate the fed. we are watching this play out as trump doubles down on his efforts to gut the independence of the fed prude as we've seen with demands that you drop rates immediately. in fact, this copresident musk attacked fed independence in the tweet earlier this year. chair powell, i know you have been adamant about the independence of the fed and have thus far resisted pressure from trump, but after your decision to eliminate d.e.i. initiatives: trumps illegal order, i am concerned that trump has more

influence over you and you let on. i speak for all my colleagues on the democratic side when i say that you must stand firm in defending the feds independence, rejecting attempt by elon musk and his does minions to gain access to the fed, its systems and data come and speak forcefully about what is at stake for our economy. the american public must hear from you, are central bank today. >> the gentlewoman yields back. i yield myself five minutes for questions. think again, chairman powell, for being with us. let me start with the feds bank regulation and supervisory function. as i mentioned in my opening statement over the past 2.5 years, the outgoing vice chair for supervision has pushed new regulations that would move the united states towards a one-size-fits-all approach to credential regulation disregards the congressional mandate that quite clearly established

regulators to tailor bank regulation based on institution size, complexity and risk profile. earlier this year the fed board announced that michael barbee stepping down from his position as vice chair on february 28, 2025 or earlier, should a successor be confirmed. significantly the board also announced at that time that it does not intend to take up any major rule makings scintilla vice chair for supervision successor is confirmed. i've discussed this with you, i've got concerns about that. you are not abdicating your supervisory response we wait around for vice chair supervision. do you agree that it's a board of governors that has the responsibility for bank supervision policy? >> i do, and i would agree that we need to carry on with our regulatory and supervisory duties. can't take a holiday and we will repeat -- proceed with the things we need to proceed with.

quick son know you enjoyed time with this senators and you talked a little bit about basel 3 in game. i talked about the intent to harmonize was true for the largest institutions in the world, but also do that in a way that is capital neutral. many of us here in congress on both sides of the aisle feel like vice chairman bars approach was -- would you tell the committee today that it's your intent to reap pro se thousand three in game approach and speak on behalf of the fed only, not the other supervisors, and that it be taken into account the comments that be generally capital neutral? >> we do intend to repurpose basel three and we intend to do that just as soon as we can get together with the new leadership and other banking agencies and

as i mentioned i think we can do that pretty promptly. alonso's people are in place, i look forward to doing that. my long-held view as i've said in many of these hearings is that capital in the banking system for the largest banks is about right and that would be my starting point on going into these discussions. that i do want to defer and leave it for my upcoming new leadership for those agencies to have their own views on that. >> i think that important. i do want you to take into account how basil three in game proposal interacts with other pending rules whether they are on liquidity or other things like operating risk in the companies. >> that was a lot of the centrality on the comments we saw on your bar proposal. turning to monetary policy, looking back at 2020 and 21, i was looking at all the principal monetary policy rules that you

report in your semiannual report, had you followed any of the monetary policy rules that you track, they would've had you tightened sooner in the cycle rather than waiting. i think that could've reflected, maybe not seen as have a forty-year high inflation, using the beta finds -- of hindsight, do you think you should've looked at those rules more closely in the open market operations and tightened sooner? fed chair powell: i will say and i've said before that hindsight suggests that it would've been good if we had tightened earlier. i don't know how much difference that would've made. i'd be very careful with those rules. those rules in the middle of last year suggested that our policy rate was a couple hundred basis points too high. so we need to -- they are a starting point, not an ending point. >> we've had this conversation before. the point is they do offer a roadmap and you do mention them in writing and monetary policy

reports, except for one time during the pandemic. i think though that you are adding that to your reference point in your forward guidance and in your communications, i think would be important. can you tell us about the review of the inflation targeting and when do you expect to complete that? fed chair powell: i expected to be completed by later this summer this year. we're just beginning it now and you know were going to look at all the decisions we made back in 2020. were going to ask ourselves what's change, we will be open to criticism and good ways of thinking about it. i think will make appropriate and discrete adjustments. >> i think you for being with us and i turned to misses waters for five minutes for your questions. >> thank you very much, mr. chairman. it is no secret president trump, what he wants to do, he wants to do away with the federal reserve all together.

he said he knows interest rates much better than you do. i want you to know that some of us here have been fighting to make sure that everybody understands the importance of the central bank, every country dealing with crypto, their central bank is involved. but of course trump and the opposite side of the aisle fought us, and that's one of the reasons we were not able to come together with the bipartisan agreement on stable coins. you previously said that you would not resign if trump asked you to do that. do you stand by that commitment? fed chair powell: i have no changes to that. >> i can hear you. fed chair powell: yes. >> thank you. please let the record record that adequately.

i appreciate that because you have a right to your position, not to be interfered with by law. i believe that when the constitution comes knocking at the fed store you're going to let them in. we've had no contact and i have nothing for you to report today on that. you know what happened at treasury and you know what happened and the people's country being violated because all of our privacy has been taken up by elon musk and trump we don't know what all they have on us, our bank accounts, everything in our lives. so i want to protect it in the fed, mr. powell. the last time he testified before this committee, you said, and a quote, really successful institutions in the united states generally are those that do a really good job on

diversity and get the best out of people and attract a broad, diverse range of talents to the table. that is why -- that is the way we feel about it and at the fed. and that is what we've been doing and will continue to do. chair powell, how will you ensure that the fed continues to attract the best and most diverse employees? fed chair powell: you know, institutions like ours, private and public, or in a constant contest to hire the best talent in the country, and we've all learned, and certainly we have that we would go anywhere to find that talent, including places that we didn't go 25 years ago. and we will just continue to do that. we are recruiting, as you know, it many many universities and colleges, including historically black universities and colleges and others. that's where we find it and that's our practice. we think that's the best way to go about it. >> thank you very much.

that's what i've always felt about the fed, no matter what they call it, you only attracted and hired the best qualified people in your operation. no matter what they refer to it as, what they call it, whatever way they define it. is that right? fed chair powell: yes. ? thank you chair powell, are you willing to provide my staff within immediate update on your equal employment -- i believe you know they were created with the dodd frank reforms. it is in law, and as i understand, any attempt to dismantle them would have to come before the congress of the united states of america. is that your understanding? fed chair powell: yes. >> to what extent have you

consulted with other board mirrors in determining how your agency is complying with section 342 of dodd frank and as well as any other federal antidiscrimination law? fed chair powell: i think we've consulted with senior staff and board members squad a bit. >> chair powell, days after his inauguration, president trump issued an executive order on digital assets which includes a prohibition on central bank digital currencies or cbdc's, the executive order band any form of digital money or monetary value dominant -- denominated in the national unit of account that is a direct liability of central bank. i'm concerned that this extremely broad definition could go far beyond cbdc's, but thank you very much. my time is up, but i appreciate

your presence here today and i appreciate your willingness to stand up for your right. >> the gentlewoman's time has expired. >> i now you'll back. thank you. >> i do invite the chairman to respond to the gentlewoman's question on cbdc's in writing. now we turn to the vice chair of the full committee, bill haas anger, the gentleman from michigan. >> thank you, mr. chairman and chair powell, good to see you again. you talked a little bit about your review, a law has changed in the last five years, dimmick inflation and higher interest rates to name a few. however i believe your dual mandate of maximum employment and stable prices should remain the ultimate objective. i assume you agree with that. let the record reflect a slight head nod on that. the committee is going to be very focused on monetary policy with my good friend from oklahoma mr. lucas chairing a task force that i'm happy to be a part of, we're going to be

addressing some of those issues. chair he'll touch on some of the rule set up and discussed. i have always there's a -- there's a number of rules, i suggested at one point that we could call it the yellen rule with chair yellen. but there need to be some sort of public declaration of what to benchmark against not still feel that is of some importance. you outline your timeline on this particular review, but i'm curious, do you believe that the last policy framework limited the fed's response to rising inflation, something that you and i have talked about over the years? fed chair powell: no. i will tell you why we didn't raise rates. without the inflation was transitory. i can show you forecasts from the end of 2021 by us, by staff, other blue-chip. everybody thought was going to be transitory. that's why we didn't raise rates. >> i also distinctly remember

hearing you and secretary yellen at the time were sitting next to each other and it look like he visibly scooted away when i asked you both whether it was still transitory, and you had for the first time ever a separate answer. her answer was yes, he still was transitory. he gave a very fed speak answer of, we no longer believe the data shows that. so no, and we kind of go to chair hills point, we think it might've been a little late on that. back to the review, i'm curious what sort of input are you looking for from the public and from congress as you go into that review? fed chair powell: from the public we will do a series of fed lessons events which are very successful the last time and involves a sitting down a meeting with people, some who know a lot about what the fed does come a some of whom just tell you what's going on in their communities. it was a very successful part of

our outreach last time. in terms of congress, you informed of our progress and we welcome anything you may offer. it's a public review as distinct from what we were doing before, so we are welcoming views from all over. >> look forward to us having more conversations about that with the working group. i want to switch topics and focus back to bank supervision. michael barr has stepped down from his position as vice chair for supervision effectively at the end of the month and whether frankie president trump feels that position is entirely up to him. but in the absence of a vice chair for supervision, you're still working, i think, your quote to the chairman was there's no time for a holiday. now this vice chair of supervision is a fed governor that is frankly extraordinary powers and responsibilities, and ultimately my question to you is

, does the fed really need a separate vice chair to complete its work? i got here after the 2010 election, 2011, shortly after dodd frank was passed. i know the vice chair position was created by dodd frank. i've just been dealing with the echo effects now for the last going on 15 years of dodd frank. do we really need to have a separate vice chair of supervision? fed chair powell: so for many years, as you know, we did our business without a vice chair for supervision. that means is everything goes through the full board. i think it was effective and there was less volatility. >> explained that, why was there less volatility? fed chair powell: well, because you've got a group of seven people on the board and there will be, as appointments change there will be some change in the approach to regulation. putting it all on a single person admittedly, just to

recommend to the board can lead it to some volatility. which is really larger swings in the kind of things and that's not great for the institutions that we want to regulate. we want to have a good set of regulation doesn't swing back-and-forth very much. the question of whether it's a good thing to have in the law is really one for you, but i will tell you, once a vice chair bar completes his term in a few weeks we will continue on until there's a new vice chair for supervision. >> the chair recognizes mr. sherman for five minutes. >> chairman powell, you are the only bipartisan person or thing left in washington. you are appointed by obama, trump gave your promotion, biden reappointed you, and you were the only biden appointee not to hear the words, you're fired, from our president. so i hope we listen to what you

have to say, because you're the only person or thing that i can identify and washington that has support on both sides of the aisle. mr. huizinga mentions the importance of your dual mandate. project 2025 calls for abolishing the dual mandate and eliminating a mandate that you focus on employment. if we were to give you just one mandate dealing with price stability and take away the mandate on employment, over the next 10 years, would our gdp be higher or lower? fed chair powell: it wouldn't be possible for me to say. >> does the fact that you focus on employment as one of your dual mandates lead to lower unemployment or higher unemployment? >> it may do so we do balance those things and some sins.

that may be right. >> and noticed that a lot of the hiring freeze the fed has removed all its job postings, i'm hoping that your personnel policy will be as independent as everything else at the fed. i'm more concerned with the president's statement at 7:58 this morning where he said interest rates should be lowered. he said it, will that influence what the fed actually does? fed chair powell: i as a practice never comment on what a president says but we will continue to keep our heads down and make our decisions they start what's happening in the economy. >> he went on to say, he said interest rate should be lowered,

something which would go hand-in-hand with upcoming tariffs, let's rock 'n' roll america. i certainly agree with the rock 'n' roll america. but the peterson institute says that the policies that the president ran on will raise the cpi between four and 7.5 points. i think the biggest element of that is the proposed tariffs. if we have higher tariffs across the board, say 10%-25 percent, would that increase the cost of living, and wooden increase in the cpi or related indexes of the cost-of-living lead to higher interest rates? fed chair powell: there are many organizations, public and private, whose role is to speculate publicly about what this might be. but we are doing is reserving judgment until we actually know what the policies are. if we have a higher cost of living, does that lead to higher interest rates?

fed chair powell: if inflation goes up in general, of course we use our tools which is the interest rate to bring it back down to 2% over time. >> yesterday you told the senate were going to release the stress test scenarios before we implement them. will you take a holistic look at large bank capital requirements, including their risk of capital ratios like basil three in game stress testing to make sure you don't have a contraction in the ability of credit to main street businesses? fed chair powell: yes. >> there's a proposal on project 2025 that they abolished fannie and freddie.

craig's fannie and freddie would be privately funded. i think your privatizing freddie and fannie -- it might have some virtues but it would lead to higher mortgage rates. fed chair powell: it could. >> the cfpb has been put on ice, but all the regulations remain in force. so if you are bank that wants to comply with those regulations, there's nobody that can give you any clarification, so you don't know, and if you are a bank that doesn't want to comply, the next presidential election may put into practice is cfpb that enforces all the regulations that the trump administration has tried to eliminate. does that cause confusion for banks? fed chair powell: you're speculating about what the situation might be. i would say that it could. >> the yields back.

on -- i now recognize myself or five minutes. chair powell, let's talk about the balance sheet. as we've discussed several times before, the consistent massive growth of the federal debt creates long-run challenges for both the united states and settles future generations with an enormous burden. but it also creates a challenging environment for the markets as the treasury market expands in kind. as the fed engages in quantitative tightening around treasuries -- could you briefly discuss the conditions that determine the ideal level of reserves? fed chair powell: sure. you say the intent is to slow and we have slowed but then stopped the process of shrinking our balance sheet at a time that is somewhat above the level that we judge to be consistent with our ample reserves.

meaning we don't want him to suddenly appear to be shortages of reserves. are going to think of where those shortages might appear and were going to put a buffer on top of that because nothing good happens when there aren't. there's not enough liquidity so that's our overall framework and right now feel like we're a all -- all the evidence suggest that reserves are still abundant which is more than ample. >> as you know in early 2021 the fed stated it would invite comments on supplemental leverage ratio and that has not happened yet. i made the point that the growth of the u.s. treasury market paired with a decrease willingness of banks to act as intermediaries is a major issue on the horizon. when former treasury secretary yellen was before this committee last year, i ask her about the resiliency of the treasury market, specifically about the wisdom of permanently modifying slr. she said is something the banking regulator should consider. does the fed plan to finally look at the slr? fed chair powell: yes, i believe

we will. i have for a long time like others been somewhat concerned about the levels of liquidity in the treasury market, the amount of treasuries has gone much faster than the intermediation capacity has grown and one obvious thing to do is lower -- to reduce the effective supplement leverage ratio, the binding this of it. so that's something i do expect we will return to and work on with our new colleagues at the other agencies and get done because i think my colleagues are aware that over the course of recent times literally we have eight times as much debt to process but only half as many major market makers. the federal reserve is not immune to politics. you, like every fed governor, go through a lengthy confirmation process in the senate and of course you are required to answer to congress in hearings like this. i can trace a major political turning point at the fed to the

passage of dodd frank which greatly expanded the fed's regulation and supervision authority. chairman powell, do you worry that the independence of the federal reserve monetary policy function is in any way hindered by its role a bank regulator? can you do both? fed chair powell: we can we do, we will continue to do that. the regulatory and supervisory side is more contentious and political circles. we will continue to carry out as best we can and do so in a nonpolitical way as best we can. quakes that will be a major discussion topic in the task force. in my remaining time could you discuss the fed's five-year review monetary policy? what are the categories of issues the things you think would be helpful? fed chair powell: a good part of it will be the changes made in 2020 that remain in an environment where it had been stuck at the effective low

around at zero for seven years and the highest we got our rate really was 1.5% and that was the highest of central bank. the concern was that the slightest downturn we do back and stuck. so we were looking for ways to make up for that, so then the question is, we got this inflation out of the pandemic and the events related to it but were at a different place now. and i think the chances are pretty good that we, that maybe that the effect of lower bound is still a concern, but it's not the base case anymore. so we need to look at that and decide how that, what are the implications of that for our framework. thank you, chairman, and i look forward to several more discussions on these topics, and with that, i yield back the balance of my time, and i recognize the gentleman from new

york, mr. meeks, for 5 minutes. >> thank you, mr. chairman. chair thank you for being here today and you've indicated in past hearings that geopolitical tensions pose important risks to global economic activity. in fact, around this time last year when you appeared before the committee, you and i discussed how conflicts around the world, specifically the war in ukraine, had impacted the cost of things like groceries in the united states of america. at that time you indicated that the war had caused commodity prices to move sharply back home. does that sound correct to you, familiar to you? fed chair powell: yes, it does. >> so just to reiterate, in this interconnected world that we live in, would it be safe to say that economic instability in other countries has the potential to impact economic factors here in the united states?

fed chair powell: sometimes, >> and so given that fact, would it seem like a smart move for the united states government? to remove one of our most effective strategic tools. that by mandate assist us cocial interests. by supporting developing countries' economic growth and building countries. building countries' capacity to participate in the world trade. would you agree with that? fed chair powell: it's not for me to be the judge or to say on that. >> well, we do know that a number of like usaid they buy a lot of their agricultural products, etc. from american farmers and in fact, it helps the us economy,

when you look at the volume of agricultural products that are being bought so that we can continue to be a part of the rest of the world, would that be correct? fed chair powell: as far as i know, yes. >> so you know today we find ourselves facing a situation where the president and his doge buddy elon musk seemed hell bent on dismantling. usaid, no matter the consequences. even if they are dire. to me, the assault on this congressionally authorized body represents an attack on the rule of law and should outrage every member of this body. every member, democrats and republicans and that, and i, and i know that your interest is squarely within your dual mandate and not foreign policy. i sit on both committees.

i'm here, but i'm also the ranking member on the foreign policy committee. and so i can't sit here today and pretend that what we're doing won't impact employment and economic stability right here in the united states of america. weakening usaid will fuel global crises, endanger american security, embolden other nations like china and russia and leave us here in the , trump administration solely responsible for the fallout. so i have to take this opportunity to urge my colleagues on the other side of the aisle to also stand up for usaid. anytime we travel, we go visit what they do. we go visit the good that they do.

we go visit what their and how their economies improve so that they can be part of the global economy. so if not because people just care about the rest of the world then because we care about , our country, and recognize that instability elsewhere threatens our stability right here. it is extremely important in an interconnected world. because the economy is interconnected around the world, we cannot isolate ourselves from the rest of the world. i thank you, mr. chairman. and i yield back the balance of my time. >> gentleman yields back. the chair recognizes the gentleman from texas, mr. sessions, for 5 minutes. >> mr. chairman, thank you very much, chairman powell, welcome. we're delighted to be here and i

hope that this comes with greetings from every single member that we appreciate and respect you taking the time, even though you're expected here. we think you show up and we admire you. mr. chairman. you and i both know that way back when and we assumed 21, that there was a decision made by the fed that gets close to quantitative easing and then the term tapering, and we know that it was sold as a monetary stimulus to help the country, and i get that. there was about, in my opinion, $2.33 trillion that were taken out in loans. and the chairman just spoke a minute ago about the term debt versus growth, debt versus growth about this amount of money. it sits out there on the debt side. could you please take a minute and discuss this?

-- this issue and how we should , be looking at it. thank you. fed chair powell: sorry, mr. sessions, are we talking about asset purchases that we made during this? >> we are. we're talking about when when the fed went and sold treasuries. fed chair powell: no, we bought treasuries. >> we bought treasuries, yeah, we bought treasury, so. fed chair powell: you know, it was a situation. i'll tell you why we did it. you know, we, we were just out of the worst part of the pandemic and we didn't know how, frankly how good things were going to be, how strong the economy. we were very concerned. covid is still raging and it actually, you know, had a very strong wave right into 22. but we wanted to just, we didn't want to stop buying treasuries too soon because that has a stimulative effect on the economy because we didn't want to provoke an unwanted tightening in financial conditions at a time when we thought the economy was still vulnerable. you look back in hindsight. we probably could have done that earlier and halted purchase

earlier. in any case, we turned right around and started shrinking the balance sheet. >> you moved it from about $120 a month to 110. fed chair powell: well we're down now we're now we're, we've been tapering for two years now and we're down more than $2 trillion. so and we're still going, we're still going. so that's why we did what we did. >> tell me what that looks like in the longer term aggregate versus with what the chairman said debt versus growth because we believe the debt remains and the growth is not equaling that ability to pay it back. fed chair powell: so what happens is we borrow money to , cover the spending that congress has done. our purchases don't affect that. we're basically issuing reserves, which is cash. and we're reducing, we're retiring treasury securities, and the effect of that is to drive down long-term rates. that's the whole reason for qe.

and what are you paying for those long term rates, market market rates? fed chair powell: we're paying exactly the market. >> and what would that market be approximately a year ago or to now? fed chair powell: well, you know, the 10 year, we're not, we're not, of course we're going in the other direction now. we're shrinking now, but we are, you know, the 10 year was, was yielding a very, very low. the yield on was quite low during the pandemic, extremely low, because, you know, growth was slow. there was a lot of demand for treasuries, so we were pushing down rates to support economic activity. that's when you, when you're, when you can't lower your policy rate anymore and you want to do more stimulus, that's really the main thing you can do. it's actually the forefather that was milton friedman who came up with that thought way back in the past. but that's, that's what we did. and then, as i mentioned, we turned around as soon as we lifted off and started raising rates, we immediately started shrinking the balance sheet and we've shrunk it a lot, $2 trillion and still counting. >> you have shrunk it to trillion dollars? fed chair powell: yes, we have.

>> ok, and what do you believe remains, and you believe you're now stable for moving forward. fed chair powell: so i think we have a ways to go. the actually the level of reserves, which is the thing we're focused on, hasn't really changed. all of that has come out of what's called the overnight reverse repo facility. i'd be happy to spend some time with you on this. this stuff is very complicated. >> yes, i've tried to find new data on it, and the last i found really was a crs report of 22. so i very, very big 127 22, and so the changes that you speak of are important and so i would, would appreciate that time. fed chair powell: i would be happy to do that. >> great. i want to thank you for being here, the confidence that this, that the american people have that we will turn not just the economics of their lives, but of the country is very important, and i today spoke about the country, and i want to thank you for your

service and time. mr. chairman. i yield back. >> the gentleman yields back. the chair now recognizes the gentleman from georgia, mr. scott, for 5 minutes. >> thank you very much, chairman, and welcome chair powell. chair powell, i'm worried about these tariffs. and i want you to kind of share with us your thoughts on these tariffs. i'm worried about it. i think the president is wrong here. tariffs can cause a terrible situation to the economy. i'm concerned about the inflationary impact on tariffs and where cost increases from the tariffs, there's a cost to these tariffs. and we need not move into this area blindly. and some of these costs will be observed by business companies,

but there are other costs that will be borne by the american consumers. we don't even understand this, and yet you have the president just using these tariffs as a means of fight or like a war. and this is going to do it. everybody is not going to be mexico or canada, and while we got a little time, i want your thoughts on the dangers of these tariffs. the stock market is anticipating rate cuts. what will these tariffs do about that? does the fed see financial market stability as a factor in this decision making process when considering the rate cuts? and here is specifically what i want you to get to.

in light of the president and politely, i will say his ill crafted tariff strategy, do you foresee future rate cuts as a result of inflationary issues or due to a weaker labor market, and what do you consider to be promising inflation data? that's our big fight. and these tariffs are going to just add to inflation like a rocket ship. your thoughts. and, and share with us, give us your opinion of the danger of these. there's a cost here. tell us what you think about this. fed chair powell: the president has certain authorities over tariffs. congress has authorities over tariffs. the commerce department is involved in some ways, but the

fed has no role in setting tariffs, and you know, we don't comment on decisions made by those who do have that authority. we try to stick to our own knitting. in this particular case, we're, in this particular case, we're, it's possible that the economy would evolve in ways that, because of tariffs or partly because of tariffs, that we would need to do something with our policy rate. but we can't know what that is until we actually know what policies are enacted. and remember it's not just tariffs. there are significant changes to immigration policy, fiscal policy, and also regulatory policy. you put all four of those, and all 4 of those were things that the president was elected to do. we will then try to make an intelligent judgment about the overall effect on the economy of those and conduct our policy accordingly, but we're, it's not our role in any way to comment on the wisdom of the policies that are enacted by

congress or by the administration. >> well he have an effect on , whether or not you will resume your plan to cut the interest rate this year or continue to hold. chair powell: we'll make our decisions as we go about about what to do with interest rates based on, you know, the data that we see, the outlook, the evolving outlook, and the balance of risks, and, you know, we'll be considering all of those things. we won't be focusing on any particular policy, and i can't tell you, you know, what we'll be doing because it will really depend. it's a fairly uncertain environment right now. the underlying economy is very strong but there's some uncertainty out there about new policies. we're just going to have to wait

and see what the effects of those policies are before we, before we think about what we can do. >> well, all i want to say, god bless you. i know your strength, and we've worked together over the years on many things, and this nation is grateful that we have you, your wisdom and intellect at this time. >> i agree, but the gentleman's time has expired. the chair now recognizes the gentlelady from missouri, ms. wagner. ms. wagoner: i thank the chair and it's good to see you again, chairman powell. chair powell, under the biden administration, american families were hit with a huge stealth tax from, as we've spoken about inflation that drove up grocery prices and led to high rates on things like mortgages and car loans. since 2021, the average missouri household is paying about $1100 more per month due to inflation. to put that number into

perspective, the median family income in missouri is $69,000. these families have had to spend $13,000 more of their annual income on the exact same goods. what specifically is the federal reserve's plan for making life easier for everyday americans? chair powell: so the best thing we can do for americans is to vigorously pursue both stable prices and maximum employment. we're trying to get back to a long expansion where prices are stable, around 2%. >> you seem to be there on labor, as you pointed out. what else? chair powell: sorry? >> you seem to be there on

labor. what else? chair powell: i would say that we are close but not there on , inflation, and you did see today's inflation print, which, which says the same thing. we have made great progress toward 2% last year. inflation was 2.6%, so great progress, but we're not quite there yet. so we want to keep policy restrictive for now so that we can see >>. >> let me switch topics. i continue to believe that as we've spoken about and as was brought up prior colleagues here that the federal banking agencies, including the federal reserve should scrap the flawed basel iii endgame proposal and start over. you talked a little bit about how you plan to perhaps do that. and a timeline potentially. but how will the public, chair powell, be able to provide comments on any revised proposal as required by the administrative procedures act? chair powell: so i fully expect and i think it's a good idea for the united states to finish basel iii in a way that's, you know, in keeping with basel and also with what other jurisdictions are doing,

comparable jurisdictions. >> the key there is endgame. this has been going on for two decades. chair powell: where's the end already, right? we'll put all of that out for comment again and welcome the comments of for all commenters. >> i should make sure we're following the administrative procedure act as you move forward. chair powell: yes. we will. >> i understand you are interested in making the stress test scenarios that assess how a bank will perform through a crisis more transparent. as things stand now, while the fed may make some information public, it doesn't show its math. which makes it difficult to assess the robustness and analytical rigor of the stress test. recently, the federal reserve announced that due to the "evolving legal landscape," it would begin to take public comment on its stress test models and annual scenarios. can you describe the changes in

the legal landscape that have caused the federal reserve to suddenly seek public comment on its stress test regime and why it did not seek public comment from the beginning? chair powell: we're an agency that's strongly committed to following the law as written by congress and as interpreted by the supreme court. in the past few years, we've seen a string of administrative law cases from the supreme court which are dealing with different issues, but there's a common theme, and that is significantly less deference to the views of agencies as compared to those of courts, also just a raised expectations for compliance with the administrative procedures act. we take that very much to heart. and that's, this is one of the things that we're doing because of that. >> you can look at things like chevron deference. you can look at at the epa ruling by the courts, and they're returning the power back to the people and the congress, not the administrative state, not those agencies that rule makers.

chair powell: so those, because of those things, you know, we we are putting, as you went through it, we're putting the models and everything else out for comment and taking similar steps. >> well, i'm glad to see that. i understand the fed intends to complete a comprehensive review of its monetary policy strategy, tools, and communications practices. you mentioned that. what is the timeline? chair powell: we expect to complete our work and announce the results by the end of the summer. >> thank you. i yield back. >> the gentlelady yields back. i now recognize the general from massachusetts, mr. lynch, for 5 minutes. >> thank you, mr. chairman. welcome, chair powell. good to see you. thank you for your good work. chairman powell, the senate just filed a bill called the genius act. i'm always worried about anything that comes over from the senate with the title "genius" in it, but it is, it is an attempt to provide a regulatory framework for

cryptocurrency, and in that proposal, which is similar in some respects to the house proposal, it would allow individual states to oversee issuers and there would be no central federal authority. the idea is to disperse the responsibility from state to state. my concern, my overriding concern is that with that spread of an expansion of crypto and the president is 100% behind it, he just started his own meme coin, he's making a lot of money off of that, which is another issue, my concern is that the spread and expansion of crypto will in fact the traditional banking system. because it's a volatile speculative asset and we've seen some very sudden disasters with

crypto. i'm just wondering, are there any backstops that we can use , any firewalls that we can put in place that might insulate the traditional banking system, because they have access to the discount window and the fdic insured, so there may be, you know, second order impacts if we have a collapse of a major crypto issuer. are there any extra things that we can do to protect the traditional banking system? chair powell: yes. first i would say there are really two things that are happening. one is banks are serving crypto customers, and we don't want to get in the way of banks serving perfectly legal customers as long as they understand the risks and that sort of thing. we don't want to single out any particular -- >> are you speaking to custody?

chair powell: well, custody is more the second thing. undertaking activities on their own. and in that case, i do think it is appropriate to as usual as , bank supervisors, make sure that that we understand and banks understand the risks that are involved in the activity that they're taking inside an insured depository. on the other hand, you don't want to go too far. i think there were a bunch of disasters, as we all remember, and you know, we don't want to, and we were reacting to some extent to those. you do not want to go so far as to overplay your hand on that. i think we need to be mindful that many of these activities can very well be done inside of banks, and custody may well be one of them. in fact, in fed regulated banks , there are lots of crypto activities happening now. they've just happened under a framework where we made sure that the bank understood and we understood exactly what they're doing. >> right. we also have the example of silicon valley bank and signature bank, first republic bank, one of the triggering

events there. obviously the risk management was very poor in that respect, and they got on the wrong side of interest rates, but there were also some failures of issuers who had huge deposits at silicon valley, i believe, a -- or signature, maybe both of them. and the suddenness of their collapsed a run for the exits. and luckily, with the scramble, we were able to sort of save that situation so it didn't, it didn't create a greater contagion. but are there steps that we can take that might strengthen our ability to respond to that type of collapse as well? chair powell: yes. in the wake of silicon valley bank, we did work with many,

many medium sized banks that had any of the characteristics that we saw. and you mentioned a long position in long term securities that was underwater along with a very unstable deposit base made up mostly of uninsured deposits and in the case of silicon valley bank, it was a lot of similar private equity and venture capital and hedge fund companies where they were, they all just pulled their money out at the same time. so it was a bank run. bank runs are very destructive whenever they happen. so we looked for that pattern and we work with companies who had that any aspect of that pattern. and we were successful, i think in not having that crisis spread very broadly and that was that was that was a good thing. looking forward, though, we need to, we need to not forget that lesson and make sure that funding bases are stable and that we're focused on the basics of banking, which is credit risk, interest rate risk, liquidity risk.

>> gentlemen's time has expired. >> thank you. i yield back. >> the gentlemen yields back. the chair now recognizes the gentle dust gentleman from kentucky, mr. barr, for five minutes. >> chairman powell, let me ask you a quick monetary policy question and then turn to bank regulation and treasury market structure. i know hindsight is 20/20, but it's important to learn from mistakes, as you, as you know, and you've conceded that the fed miscalculated on inflation and mischaracterized inflation as transitory in 2021, 2022 time period. given that inflation remains stuck above the fed's 2% target, will you commit to scrapping the flexible average inflation targeting framework? and if not, why wouldn't you commit to returning just to a simple 2% target? chair powell: we're just beginning the review. it'll be done, as i mentioned, by the end of the summer, and that's the exact question we'll be asking. i can't commit to a particular outcome. i need to respect the process and the views of the other 18 participants on the fomc. >> yeah, i appreciate that, and

i just hope that in that process that you and your colleagues recognize that that framework allowed rising inflation to persist and allowed the fed to mislabel it as transitory. let me turn to bank regulation . in october of last year, i led a bipartisan codel to basel, switzerland, met with the basel committee on bank supervision, and there the committee actually conceded to us, agreed with me that the michael barr proposal of july 2023 actually gold plated bank capital requirements and instead of actually promoting international harmonization, actually made american banks less competitive. they conceded that to us, so i applaud the fed for not moving forward on that july 2023 proposal that would have made it harder for large banks to, among other things, facilitate the smooth functioning of the u.s. treasury market, including

holding treasuries on the balance sheet. a couple of questions. one is, should the goal of our bank capital rules, should it be regulatory harmonization internationally, or should it be american economic competitiveness? chair powell: i mean, clearly the goal is to have a strong banking system that supports american economic activity and growth. that's the ultimate goal. what you get from basel is a global floor so that the other banks can't run on less capital and sort of have a short term advantage. that was the whole point of basel, was to get everybody to the same kind of level so that it wouldn't be the race to the bottom. >> and i see that utility, but i think the goal of our regulatory system should be america first, and it should be about american economic growth and competitiveness. but let's talk about the treasury market issues. obviously we're issuing a ton of debt right now. in fact, according to blackrock, we're issuing $573 billion of treasury bonds every week.

to put that in perspective, the entire national debt of australia is $573 billion, so we're issuing australia every week in this country, if you want to think of it that way. would reducing excessive capital and liquidity requirements on us -- u.s. banks or intermediating intermediating u.s. treasury market take the heat off u.s. capital markets and increase treasury market liquidity and stability? chair powell: i strongly think it would help. >> well, i think that's especially an important comment on your in terms of your regulatory approach because as you know, maturing bonds were being financed at an average of near zero during covid and now they're about double the cost of the average of about 3.5%. so now is not the time to make it more difficult for banks to hold treasuries. let me just drill down with a little bit more detail on this treasury market structure issue. do you agree that the supplementary leverage ratio and

the enhanced supplemental leverage ratio, the eslr, are problematic as they create a disincentive for banks, especially large banks, broker dealer affiliates, to serve as intermediators in the primary, secondary, and repo markets for u.s. treasury securities? chair powell: i do. >> and so you would commit to reviewing the slr framework to create greater capacity for our banks to provide liquidity in the treasury market? chair powell: i think it is time to move on the eslr, and you know, we proposed doing so several years ago. we just didn't follow through on it, so i do think it's time. >> thank you for that. and finally, yesterday during your appearance in front of the senate banking committee, senator warren asked you about the future of the consumer protection laws that the cfpb has abolished. isn't it true that prior to dodd-frank, consumer protection laws were implemented by financial institutions' primary prudential regulators? chair powell: yes.

>> and so if there were a decision by the congress and doge or whatever to repeal the cfpb, we could return the consumer protection law enforcement function to other financial regulators. chair powell: you could, yes. >> thank you. i yield back. >> gentleman yields back. the chair now recognizes the gentleman from texas, mr. green, for 5 minutes. >> thank you, mr. chairman. i thank the ranking member as well. and would like to associate myself with the comments of the ranking member. and mr. powell, i would like to compliment you for standing up to the president. for literally preserving the independence of the fed. it was one of those pivotal moments in time. it would have been more than you simply resigning. it would have been the president taking control of the fed with one of his pluto puppets. mr. powell, i'd like to speak to

you now about the process of collecting tariffs. when the tariff is collected, at what point does that actually happen? if we impose a tariff product is coming into the country, where is that tariff collected? chair powell: great question. i'm not an expert on that. i'm going to say the customs bureau collects it, but i stand, i stand to be corrected by anyone. >> i believe you're correct. that's what my research reveals. permit me to extend this. when it is collected, it goes into a coffer. i believe we call it the general fund. is this correct? chair powell: i don't know, actually. >> it does. the tariff goes into the general fund. a tariff is another way of saying tax, i believe, for many people. is that a fair statement? chair powell: it is sometimes characterized as a tax.

>> so if the president imposes a tariff, which is a tax, and the tax is collected by some entity before it actually, on the product before it gets into the country, then the president is putting tax dollars into a general fund such that they may at some point, and these dollars, by the way, are coming from the consumer, at some point, they may be used to cover some of the appropriations of this very house that the president has enormous control over. so in a sense, what the president can do is aid with the payment of what he would call a tax break, but aid with putting

dollars in the pockets of his billionaire buddies that he collects on the tariff that the people in this country ultimately have to cover. i think that the president, while he seems to always avoid the question of how the tariffs are going to be dispersed, he knows that he can at some point use that money to help pay the taxes that he plans to return to his billionaire buddies. i think that's a very sinister way of doing business, to require the consumer to fund tax breaks. i think this president knows what he's doing. i think he believes that the very wealthy need more to do more, and that the poor can do more with less. i don't agree with it. and i will do all that i can to prevent it. i yield back the balance of my time.

>> gentleman yields back the balance of his time. the chair recognizes the gentleman from texas, mr. williams, for 5 minutes. >> thank you, mr. chairman. and over here, thank you. good to see you. chair powell: how are you? >> all right. the federal reserve recently withdrew from the network for greening the financial system, stating this work had extended beyond the fed's statutory mandate. well, i agree with this decision, i still have concerns with how previous fed policies may have discouraged lending to traditional energy sectors like oil and gas, and it should not be the role of the government and the federal reserve to be in the business of picking winners and losers. so my question is, can you clarify whether the fed will ensure that financial institutions are not pressured to making lending decisions based on political or climate considerations rather than sound financial risk analysis? chair powell: i confirm that is not our policy. that would be inappropriate and absolutely not something we should be doing. >> ok, thank you. the basel committee on banking supervision intended for the basel 3 endgame proposal changes

to be implemented in a capital neutral manner to ensure a level playing field for u.s. banks. following this intent, the previous federal reserve vice chair for supervision initiated implementation efforts with capital neutrality in mind. however, his successor politicized the process, imposing harsher requirements that exceeded bcbs recommendations, and this approach not only made the proposal more difficult for banks and their customers, but also weakened u.s. banks' global competitiveness. ultimately, he took his eye off the ball and went in the wrong direction. so mr. chairman, will the federal reserve commit to conducting a more thorough economic impact analysis before finalizing any capital requirements to ensure that they do not hinder economic growth? chair powell: yes. >> regulatory overreach disproportionately impacts community and regional banks, which do not pose systematic or system risk, yet they face many of the same capital and compliance requirements as the largest institutions. so many of these banks serve as

lifelines for small businesses, rural communities, and the first-time homebuyers. and it's key for the federal reserve to protect these institutions and ensure that they are not subject to one size fits all regulations. so mr. chairman, what steps is the federal reserve taking to ensure that new regulations do not force consolidation in the banking industry, therefore make it a little harder for smaller institutions to compete? chair powell: so like everybody else, we see the consolidation that's happened really over the last 30, 40 years and community banks going out of business and just fewer and fewer banks, and we know that may be happening due to technology and various things, but we, and also just people moving to cities. away from rural areas. but we do not want our regulation to in any way foster that. so we try hard and i try as hard as we can to make sure that we're not letting the heavier regulation that we apply to the gsibs and even to the regionals slip down to smaller institutions that are serving

their community and generally doing a good job at that, and we try hard to do that. this is tailoring. it's very much of a basic value that we have and it's also what we're instructed to do under the law, and i won't say we're perfect, but we do keep this in mind. >> i'd like to say thank you for being here. good to see you. and with that, i yield my time back, mr. chairman. >> the gentleman yields back the balance of his time. the chair turns the gentleman from missouri, mr. cleaver, for 5 minutes. >> thank you, mr. chairman. thank you to our very capable and courageous ranking member. mr. chairman, thank you for being here today. as you know, my words, the cfpb has been disemboweled over the last 10 days or so.

which probably, you know, it may not be much concern here on the hill in certain quarters, but there are two things i want to ask you about. rules over at cfpb must be from time to time updated. right now there is no system for updating any of the rules. one of the other issues is that, is there a regulatory gap or are there regulatory gaps that you can see clearly that people can feel? because there is essentially no cfpb for the first time since the end of the great recession. chair powell: i don't think we know where this comes to rest. you may have seen last night

that the administration nominated somebody to be the permanent head of the cfpb, so i am not sure what the end intention is here, but if you, if you assume that it goes away, then yeah, there would be a gap, there would be -- there would not be any federal agency that can examine banks above 10 billion. whether they're state member banks or state non-member banks or national banks, that would be the case, but i don't, i'm not sure we know what the endgame really is here. >> in terms of regulatory gaps that are created when the agency was essentially shut down. i am assuming there has been somebody appointed to complete the murder of the cfpb and so if i am correct, that means they

have been tricking us all these years that they were not giving any regulations. that is my political position. i was very proud in my community to get the hispanic chamber and the black chambers to come together. we got a building. they are functioning. a big celebration all across my congressional district in missouri. and then about two weeks ago, i started getting these phone calls that i think many of us on both sides of the aisle have received. about 64% of small businesses have invoices unpaid for more than 60 days, and the fed now , the fed's real-time payment system allows individuals and small businesses to send and

receive money instantly, which is a step in the right direction, mr. chairman. so what is the status of the fed now adoption for financial institutions? chair powell: it is coming along. as was the case with ach back in the day, it takes quite a while and there is investment that has to take place on the part of banks. so we are working with a lot of small and medium-sized banks to get them comfortable with the requirements of fed now so that this can build up over time. it's something that we expected to be slow in terms of uptake, and it has been a bit slow. >> is technology adoption a barrier for smaller community banks and mission-based lenders? chair powell: yes, it is. we work with them, they're

nonbank service providers that do reach out and do a good job with smaller institutions, and we encourage that. those institutions can't actually have direct access, but they have the information and they can go to smaller institutions and show them how to do this, and there's a lot of that going on. and we encourage that. >> thank you. let me just say, i've been here on this committee for 20 years and i have seen chairman, republicans and democrats, and whether they're republican or democrat, they need to be independent. thank you, mr. chairman. >> gentleman's time has expired. the gentleman yields back. the chair now recognizes the gentleman from ohio mr. davidson, for 5 minutes. >> thank you. thanks for joining us today, chairman powell. first, i want to reflect on our hearing on february 24 here in this same room, frankly, via zoom for a lot of people because it was in the height of covid, and during my five minutes you felt confident that inflation being at 1.4% would stay under

control and it would not be an issue despite the very large , increase in the supply of money. we talked about that. in a subsequent meeting in my office, we discussed milton friedman's quantity theory of money and depth, and you believed that it was no longer relevant, that inflation would not hit consumers. we debated asset prices during the hearing, and you claimed that the federal reserve's massive purchases of treasuries did not distort the market. lastly, during the biden administration, you were actively calling for more fiscal stimulus at times. and at some point along the way, more dollars chasing fewer goods seems to have actually resulted in higher prices. all of these things inflated money supply, inflated asset prices, inflated consumer prices , happened on your watch. in light of the actual outcomes, have your views changed? chair powell: well, i think we

have learned a lot, but maybe not the lessons you think. but i do think we have learned a lot from the situation. we and essentially all of mainstream macroeconomics thought that this would be transitory, and what that meant was it would go away fairly quickly as the supply side healed and as demand came down. and it didn't. it actually did go away and substantially for those reasons, but it took two years. >> to that you felt like in the point, fall that it was going away and things were going, going to be under control and you had achieved your soft landing, but the market pretty quickly spoke. i mean, frankly, rates went up over 100 basis points where you guys were going down. and now in today's reports we see that inflation is actually trending up quite a bit from where it was in the fall. so again, would you, in light of the facts, would you reassess what you are doing with the

central planning? chair powell: you are right that long-term rates went up but they , did not go up because of expectations of higher inflation. there's no evidence of that. it's actually different things. it's not about inflation. look at markets. markets are pricing in break evens. i will show you -- >> so the markets don't believe there's increased risk with massive fiscal spending in the market, and they're not demanding a higher premium because there's more risk? chair powell: more risk, yes, but -- >> when you see asset price inflation and rate inflation, doesn't that result in consumer price inflation? chair powell: it's not a question of that. you're saying that the rate increases at the long end are caused by expectations of higher inflation. >> they certainly -- chair powell: it is largely not true. >> if they don't influence the inflation, why do you guys try to steer inflation by controlling the rates? i mean, the reality is you've

got pressure, including from the president, to lower rates. are you, are you going to be able to get lower inflation with lower interest rates? chair powell: i think our policy's in a good place. i think inflation has come down from high levels to 2.6% last year. my colleagues and i are holding where we are, awaiting further evidence of inflation. >> a lot of the data that you guys are looking at lagged just like when you said it was 1.4% and everything's fine. i think a lot of people said it's not fine. you've got to go out and talk to regular people and constituents in southwest ohio, just like all over the country, aren't saying they're fine, and they might go that the rate of increase is slowed down a bit, but they know that the prices aren't going down. they're still getting hit pretty hard. and meanwhile you guys still continue some of these policies like you're paying banks still not to put their capital at risk in the market. interest on excess reserves going back prior to the 2008, 2009 financial crisis, you didn't even pay banks for reserves. now you're paying them for an unlimited amount of reserves that they want to hold on on it. to what extent is that distorting the market by pulling capital out of the market? chair powell: none, not at all. you're right, though.

people are unhappy about the price level. and that's what we need is several years of real wages moving up higher than inflation. >> ok, so if they're having no impact at all, why is the fed paying the interest? what is, what is the rationale for the policy? is it monetary policy or is it regulatory policy? chair powell: it is how -- >> because as chairman barr pointed out, you guys are effectively gold plating the standards and the u.s. is actually holding way more reserves than we're required to. and part of that is ioer. chair powell: what's your question? >> if it's not distorting the market what's the purpose for , doing it? if it has no impact on the market, why are you doing it? chair powell: it is the way we exercise interest rate control in the market. >> i will have questions for the record. i yield back. >> the gentlemen-year-olds back.

the chair recognizes the gentle lady from ohio, ms. beatie for 5 minutes. >> good morning, chairman palin. -- chairman powell. thank you for being here. i want to thank you for your leadership at the fed over the last 7 years, which i've had the pleasure of being here that entire time. under both republican and democratic presidents through an unprecedented pandemic and certainly an uncertain economy. your apolitical guidance is a testimony to the historic, independence of the federal reserve, which is absolutely essential for you to carry out your mandate, keep prices stable, and achieve maximum unemployment. over the last few years, inflation, as we all have witnessed, has come down from a high of 9.1% in 2022 to about 2.8%. during your tenure under president biden, we saw the unemployment rate drop to a staggering 3.4% in 2023. its lowest rate that we've seen in some 55 years, and now it sits at around 4.1%, which is

still low by historic standards, although the economy has a way to go, and american families, as we've heard throughout today, are still struggling to pay for expensive groceries and gas and the list goes on. it is truly remarkable what the fed has managed to achieve over the last few years. chairman powell, while i have some on this committee, you and i have frequently discussed the importance of representation at the federal reserve and the benefits of recruiting the best and the brightest that this country has to offer by broadening the talent pool. the fed has been a great partner to this committee on this issue, which, as everyone knows, has been very personal to me. however, the white house recently attacked on these very basic concepts are incredibly concerning to me as many of my democratic colleagues. so i'm just going to ask you a few questions, and you may answer them for the sake of time, yes or no.

while the fed continue to follow existing law as passed by congress that requires all financial institutions reform, recovery, and enforcement agencies to maintain offices dedicated to recruiting from a broad talent base and fostering an inclusive workplace? yes or no. chair powell: yes. >> i am pleased to hear, as my ranking member mentioned omi and also talked about implementing it under dodd-frank section 342. but i also am pleased to see that the fed recruits from ohio schools. i'm from that great state of ohio. institutions like the ohio state university or casey western reserve university, denison university, kenyon university in oberlin. do you agree that hiring the

best and the brightest, whether it's an economist, whether it's an analyst, a lawyer, a researcher or i.t. professionals that this country has to offer means that you don't have to recruit just from ivy league schools, but you can find these individuals, whether it's an hbcu or it's also a state school. have you found success in recruiting from those universities? chair powell: yes, we have. >> thank you. do you agree that these recruitment programs at their core do in fact prioritize merit and skill and simply expand the pool of candidates being considerate? -- being considered? chair powell: yes. >> do you agree that the federal reserve has directly and concretely benefited from initiatives to attract, hire, and retain a highly skilled and diverse workforce? chair powell: i do. >> as i mentioned at the top, the united states economy has come a long way since the

pandemic and peak inflation, but hardworking families still are struggling. last night i was in a store the night before last, eggs here in washington dc, $14.99. so i am concerned about how recent policies from the executive branch would impact the fed's dual mandate. we're seeing reports of course from the department of government efficiency's attempt to conduct massive layoffs. do these policies, whether you agree with them or not, affect the labor market, unemployment in the united states economy, and how does the fed plan to achieve maximum employment during these circumstances? chair powell: we have i want to say 170 million people in the labor force. so these are, you know, these are, they would affect the numbers technically, but it's a , it's not clear that it would be material. >> ok, thank you.

my time is up. i yield back. and thank you again for being here. >> the gentlewoman yields back. the chair now recognizes the gentleman from georgia, mr. laudermilk, recognized for 5 minutes. >> well, thank you, mr. chairman and chairman powell, thank you for being here. before i ask my questions, i want to spend just a moment on data privacy. i find it very ironic that my colleagues on the other side of the aisle and the ranking member in her remarks, take a sudden interest in data privacy and especially information regarding individuals' transactions when in the the ira bill they worked very hard to force banks to report the financial transactions of individuals at $600. however, data privacy is something that i have been very serious about since i've been here. i've been fighting the securities exchange commission with their unconstitutional acquisition of pii from individual investors. we're attempting to reform and modernize the bank secrecy act to limit the amount of

information taken from individuals, and, you know, they often turned a blind eye to the abuses by the cfpb, but it's encouraging to know that they're finally interested in some level of data privacy. i bring that up because there's something about data and data security i want to ask you about. the u.s. department of justice announced that it was prosecuting a senior federal reserve official for economic espionage, and this just came out in the past few days. this economist who apparently had access to sensitive monetary policy documents allegedly provided nonpublic information to representatives of the chinese communist party, and i know you're limited in what you can share about this case in a public setting, but to say that i am concerned would be, as others, be an understatement. in what you can share with us, if you will please answer a few

of these questions. do you know what kinds of sensitive nonpublic information would this individual have access to in his role at the federal reserve? chair powell: him personally, no, i don't. i mean, honestly, i really don't know the facts of the case and i can't, i couldn't comment, but -- >> ok. just assuming certain types of information from the role he is in, is there any idea if information was provided to the ccp, what advantages would that give them? chair powell: without knowing what it is, i can tell you what staffers generally get, which is kind of the economic analysis that we do in advance of an fomc meeting. in modern central banking, we try to be as transparent as possible, so i don't want to sound like i'm dismissing this case, which we take very, very seriously, just as you do, but what we have that is secret is knowledge of what we're going to

do in the future and in modern central banking, the whole idea is to be transparent about what you're going to do. so nonetheless, this is, we take this case very seriously. >> and i appreciate it, and this is not adversarial at all. i'm really just trying to get to what possibly the chinese could have done and if they've done anything with it. of course, if you're unaware of the type of information to access to, you couldn't answer that question, but does the federal reserve have an insider threat program designed to combat this kind of espionage? chair powell: we have very, very strict information handling requirements. we do background checks on every federal reserve employee and we start those before they start working there. we do everything we can on this, -- on this. >> but obviously certain things do happen and people slip through the cracks. does this open the door for a

more strategic analysis of the federal reserve and how to protect critical economic information? chair powell: yeah, i do think once we see this unfold a little bit and know what the facts are, i think we'll absolutely look and make sure that our controls and that and that employees understand the consequences of this, and i think they do. but with a few 1000 employees there's going to be one sometimes that breaks the rules, and again i can't comment on this case. >> i understand and it is sensitive. but as things move forward, i'd ask if you could at some point share with me and this committee more information so we can work with you to make sure that our nation's policies are kept just to those more so kept away from our adversaries. chair powell: i am glad to do that. >> with that, i yield back. >> the gentleman yields back. the chair recognizes gentlemen

from california, mr. vargas, ranking member on our monetary policy task force, recognized for 5 minutes. >> thank you very much, mr. chairman. chairman powell, thank you. i don't want to insult you in any way, but i hear you're a deadhead. chair powell: i'll own up to that. [laughter] >> so i assume that with a few words oftentimes you could, you would know one of the songs of the grateful dead. so i'm going to give you here a quote to see if you know who said this. "the risk of a dispute over the position could be a distinction, a distraction, excuse me, to our mission." do you know who said that? chair powell: no, i don't. >> michael barr did. and i would be remiss if i didn't say and mention that what governor barr did was recently was very selfless and noble. the rest of that quote, by the way, is "in the current environment i've determined that would be more effective in serving the american people from my role as a governor." so i think he himself took the position that it would be a

distraction to continue in that role. i personally think he's a person of great distinction that always managed himself in a way that was appropriate, and i appreciate the role that he played. i didn't always agree with him. he was always agreeable and certainly was able to communicate with him our disagreement. and again, i just want to thank him, because i think what he just did is what a lot of people can't do, and that is make a decision that for the betterment of the situation that we're in for our country, he would, he would purposely do something that wasn't necessarily beneficial to him personally, but anyway, i'd be remiss if i didn't thank him. but since i am asking tough questions, i do want to ask you another tough question. see if you know this one. do you know what the ponte del souspide is? chair powell: i do not. >> ok, you might know it in english. it's called the bridge of size.

are you familiar with the bridge's size? chair powell: rings a bell. >> ok. in venice, the doge, who was the leader of venice, had a palace. and across the palace, he had his prison. and oftentimes, a prisoner would be taken into the palace and interrogated in a very rough way. and then be tortured and then after he confessed to something he normally didn't do, he would have to walk over the bridge. and then into the dungeon and oftentimes die there. however, before he completed the task of crossing the bridge, there are 2 windows there, and he would stop at the windows and he'd look out over the magnificent city of venice, and it's the last time oftentimes that person would get to see venice. and he would sigh, and that is

why it is called the bridge of sighs. el ponte del souspii. the reason i bring that up is i think a lot of americans feel that way right now. that they're crossing this bridge and maybe it's the last time they've seen the beautiful america that we've had. and they're worried. they're worried about the usurpation of powers. they're worried about the balance of powers. now i was very proud of you when you stood up and said, i can't be fired. the president can't fire me. i'm staying. can anyone up here fire you? chair powell: any one there? no single person can. >> no single person can, right? i hope you continue with that independence, because i think at this moment is very important. someone mentioned it earlier and i think it is very, very important. so. with that out of the way, i did want to talk about the dual mandate, especially the employment issue. for a lot of people in america, their job is the most important thing for them, not even their investment, their job, and that's why employment is such an important position, i think, and

so important to be part of the dual mandate. are you looking at changing in any way the dual mandate? chair powell: we don't have that authority. >> who has the authority to do that? chair powell: congress. >> only congress? chair powell: congress would need to pass a bill to change the dual mandate that the president would then sign. >> that's right. and so i hope that you maintain your independence and at the same time follow the law, that there's a dual mandate. and that's, i think, very, very important to most americans. and with that again, i thank you for your service. i thank michael bar. i know he's going to continue to serve. i know he'll serve honorably like he always has. and with that, chairman, i yield back. >> the gentleman yields back. we recognize the gentleman from middle, tennessee, mr. rose, for 5 minutes. >> thank you, chairman hill and ranking member waters for holding the hearing today and thank you chair powell. always good to see you here with us.

chair powell, you may recall the last time we spoke, i brought up the issue of credit risk transfers crts, and urged you to , allocate more resources to ensure that that framework applicants were receiving decisions from the federal reserve. i've recently heard back from stakeholders that they are receiving decisions from the federal reserve regarding crt applications. i hope that the federal reserve team continues to be focused on cutting down the backlog so that financial institutions can take risk off their balance sheets. thank you for that. however, i still have concerns that we are not fully optimizing the use of crts. in the case of mortgage risk, crts have successfully shifted risk from taxpayers to private capital, including capital markets and global reinsurers.

while government sponsored entities have clear regulatory treatment under the federal housing finance agency, financial institutions lack similar clarity, particularly under basel iii. i understand that the federal reserve has begun to provide guidance, but more is needed to ensure that financial institutions can effectively manage risk, stay competitive globally, and serve their customers. chair powell, do you believe that there should be greater alignment in crt treatment between banks and gses? chair powell: that's a great question. i will take your feedback back. honestly, i don't know the answer to that. >> and i just wonder what steps is or could the federal reserve take to clarify and harmonize capital rules to promote financial stability and competitiveness in this space. chair powell: again, i'll take back your feedback, and that is our objective is to be timely and thoughtful in that work. >> thank you. i appreciate that. in april 2024, synapse financial technologies, a fintech company

that provided banking as a service solution, filed for chapter 11 bankruptcy. this event significantly impacted its partnerships with various fintech firms and banks, including evolve bank and trust. to this day, i have constituents in tennessee's 6th district who are not able to access thousands of dollars of their funds, and there has been no communication regarding the timeline for resolution. chair powell, since the federal reserve board is a supervisor of the evolve bank and trust, could you provide any updates on what you're doing to ensure that my constituents receive their funds , and the expected timeline for them to receive their funds? chair powell: as their supervisor, as you point out, we've been pressing that bank to get money back to their customers and we're actively engaged with the bank as they take steps to do so and return that money. we're deeply concerned about the complaints that we've heard and aware of concerns raised during

the bankruptcy proceedings, and to the extent they're violations of law, we'll follow up on that. >> thank you again. and are there any specific steps that my constituents could take to expedite the process or ensure that they receive their rightful balances? chair powell: i'll have to come back to you on that. there may be. i don't have anything for you though on that today. >> thank you. chair powell, is there anything else that the federal reserve board is considering to prevent situations such as this on a going forward basis? chair powell: well, i think when we see things, it's a lot of pattern recognition, so we'll be looking to avoid things like this happening in the future. >> all right, thank you. i think there has been a lack of appreciation for the work that president trump has done to restore the american workforce. it is his example of calling federal employees back to the office that we are now seeing corporate america follow as well. chair powell, as the federal

government and companies move to end work from home policies and bring employees back to the office, how do you anticipate this shift will impact key economic indicators such as productivity, urban commercial real estate markets, and consumer spending patterns? chair powell: that's a really good question. i am not sure of the answer. i've always felt that i am personally more productive in the office, and that's where i work, except on weekends when i work at home. but in terms of productivity, i think there are different views. i know a lot of ceos feel strongly that people are more productive in the office, and we'll just have to see. i also think though that, you know, on the other side, work from home did allow very high levels of labor force participation among, for example, women. we had all-time record high participation by women, so i think there are benefits from work from home. i hope we continue to realize those.

>> the gentleman's time has expired. the gentleman from illinois, the ranking member on our financial institutions subcommittee, mr. bill foster. 5 minutes. >> hi. well, thank you and thank you for everything you do. i'd just like to get some sort of level setting on what you've been facing. it's my understanding that your inspector general in the federal reserve has not yet been fired. is that correct? chair powell: that is correct. >> ok. and you've not also had the high-level resignations of senior personnel as they've had in treasury, nothing like that? chair powell: no. nothing like that yet. >> so no examples of junior personnel being given administrative access to your systems, your technical systems? chair powell: are you talking now about the payment systems? >> payment systems or other

technical systems, email systems, anything like that. chair powell: no. none of that. >> ok. all right. so so far you've not suffered through what treasury has. have you had any inquiries from, from other central bankers or commercial bankers from around the world about, you know, what can we uncertainty about whether the federal reserve will be able to continue doing its job if you suffer the same sort of intrusion that treasury did? chair powell: i have not. >> no, you haven't. they have not called you up and said, what the heck is going on, you know, do we have to defend ourselves against, you know, unknown software being installed on the system? chair powell: i haven't had any such calls. >> ok. you know, there we've also seen calls to resume resumption of calls to audit the fed, all right, which is, you know, as you can remember from that gentleman up on the wall there, this was a big theme of, and you know, first off, the fed does get audited, correct? chair powell: we are audited in the sense that everyone understands that word to mean,

which is that we have a big four accounting firm who looks at our books and gives us an opinion, does an audit and publishes that opinion. and it's my recollection there have never been any big problems uncovered in that. chair powell: we have a quite simple business model although we have a large balance sheet, we're, you know, we're like a big community bank only with less, with no credit risk and very simple. >> so in the ordinary sense, talk of auditing the fed is fully audited sense. but what was really meant, you know, certainly during the time when we were talking a decade ago, i guess it was really all about micromanaging fed monetary policy that they said we want to audit the monetary policy, which doesn't really make sense since it's a policy thing. do you have any indication of whether the resumption of calls to audit the fed will be, you know, audits or some new effort to politically micromanage the monetary policy? chair powell: i have no way of knowing. really, what it is is the gao is free to work on every area of the fed except monetary policy and does so. we have gao reports, you know, all over the place over many

years. but they don't audit monetary policy. and what the threat would be if that were to go away, you'd have investigations into decisions on monetary policy and you know that would be a different thing. i think it was designed to be a step on the way to eliminating the fed. >> that is correct. yeah, the calls to end the fed came from the same wing of the republican party and and i guess still exists. i think we're up to something like 20 republican sponsors at the end of the said bill. i was sort of surprised to see that the word tariff only occurred twice in your monetary policy report, whereas if you look at financial trade journals it's mentioned 5 times , above the fold for those that read hard copies. this must be a very hard thing for you to deal with because you know, as you're aware, trump's tariffs and other trade policies

put us in a manufacturing recession a year before covid hit. and so this is not a small thing if these resume, but you have to sort of filter out the chaotic noise and the guidance that varies hour by hour or week by week. so what, how do you actually filter that you say correctly that let's wait to see what the actual policies are. but then that depends. if you, if you listen, you know, one day you get these are the actual policies, you know, at some point you have to feed these into your into your macro models of what happens and how do you, how do you do that filtering when there's just so much random noise on the signal? pm netanyahu: well, i think it's -- so well, i think it's it's straightforward now in the sense that no one knows pretty much what the exact policies will be, that's still evolving and so. you can't really, you can't really take action. you can, you can do analysis of various hypothetical things, and we've been doing a lot of that, but ultimately it matters what happens, you know, what's tariffed for how long, you know, are there substitutes and many, many, many questions that will have to be answered.

and even then the question will be how much of that will transfer to the consumer, as you know. >> that can fall on the exporter, the importer or the retailer or the consumer. in my case, manufacturers are on both ends of this. yeah, so we really just don't. >> gentleman's time is expired, congress, it would be great. so thank you. the gentleman from south carolina, mr. norman's recognized for 5 minutes. >> thank you, mr. chairman. thank you, mr. fowler. i appreciate you coming, uh, and addressing our body. in 2011, vice chairman yellen made a statement about the concern about the long-term debt situation and the imbalance that we have in our, with our budget. in the fourth quarter, when she made the statement, the federal debt held by the public was, as a percentage of gdp was 64.75%. well now the same debt to gdp is

identified by cbo was 99% at the end of 24. and do you express the same concern that ms. yellen had about the severity of where we are with our continued long-term imbalance? fed chair powell: i have done so on many occasions. and essentially that the us, we're on an unsustainable path and the debt level isn't unsustainable, but the path is sustainable and certainly it's it's past time for congress to work on that. but that's what i can say. i can't say more than that. >> what do you think the benchmark would be and we're in the middle of the budget situation now trying to debate, particularly with reconciliation. what's the, what would you say is a benchmark that would ease, what, what level of cuts in your opinion would, would ease your concern over what we're doing with 37 trillion now, but when

you add the agents, the, the mandatory spending we have on social security as examples going bankrupt in 35. a highway trust fund running imbalance. what level do you think will give you, i guess, some assurance that we're going to get our house in order? fed chair powell: so i don't have a specific number. it wouldn't be appropriate, but i will say this in having looked at this, you know, the successful plans to programs to get back on the right track, they tend to be, they tend to make progress over a long period of time. and in other words, you've got to get to a place where the economy's growing faster than the debt, and then you need to stay on that path for 20 years. this is not the kind of thing where we can fix it overnight. we just need to be making progress and you know, right now we're running very large deficits at a time of full employment, so we need to, we need to start moving. you're either making progress or you are not. right now we're not. so the key thing is to just, you know, is for it to become a big

issue and then people work together. the things that need to be done are things that can only be done on a bipartisan basis. only. these are the things that need to be dealt with cannot be dealt with by one political party. i'll leave you with that. >> it's going to be a tall order. fed chair powell: it only grows. it gets taller every year. >> yeah, it's, yeah, it does. i that's a, that's one of the issues we are having now. the level of growth you think with what president trump is doing with giving americans confidence with the doge commission, which is giving americans hope that we would, we're seeing things that are being spent of the taxpayers' dollars that we never imagined that we couldn't get to. now he's exposing that. what level of growth do you think with the confidence growing under trump that we will be able to reach this year and the years after,

because the 20 years you're talking about, we've got to have a pretty solid, it can't be, uh, it's got to be, would you say 2% growth of gdp? fed chair powell: you know, for a long time people thought that us potential growth was a little bit below 2%. i think we've had a real, we've had 5 years of good productivity growth, and we hope that'll continue. if that does continue, then it might be, it might be 2 or 2.25%. if you're just you're talking about long term budget assumptions though, i'd be conservative and say 2%. >> you think that's doable? fed chair powell: 2%, yes. >> on another note, the stress tests that a banks run and that public has been given information on everything but how that stress test relates to them. why is it not further? why is it? most people don't understand

what it is. why is it not broadcast more in your opinion? fed chair powell: why the stress tests? >> correct. fed chair powell: so the theory from the beginning was, was to not to disclose the whole models and the way that they worked because in a way that felt like giving the test in advance. this was a brand new initiative that started coming out of the global financial crisis, very successful generally, but over time, the argument for not giving away the models, giving the models out has, i think, weakened, and then also the law has moved. the supreme court has has moved to reduce the level of deference given to agencies and increased our obligations to be transparent under the administrative procedure act. and so it's time's time to expose the models. >> thank you. thank the gentleman, gentleman yields back. the gentlewoman from texas, ms. gonzalez is recognized for 5 minutes. >> thank you, mr. chairman.

and thank you, chairman powell, for joining us this morning. as you know, the united kingdom, european union, mexico, brazil, india, and japan all allow non-bank payment service providers access to their instant payment services. this allows improvement, improved access to liquidity for users by ensuring they can send and receive payments instantly without waiting multiple days' taxes or money. i believe this is especially important for those who have tighter flow, tighter cash flows, and for those sending payments to loved ones abroad, both, which happens quite frequently in south texas and across the country. with that in mind, does the federal reserve plan to allow non-bank payment service providers access to fednow payment rail? fed chair powell: we don't plan that right now. what we really want to do is to have the consumer not care, you know, the consumer can have an access, but our payment rails go through the banks, and so you have to go through a bank. >> so there's no plans on changing that.

fe no. not that i'm aware of. >> ok. what getting on the consumer price index, what consumer price index reading would cause you to cut rates? is it 2% exactly, or is it a trend closer to 2%? how much more movement downward do you need to see in cpi for the fed to start looking at rate cuts? fed chair powell: so remember we're looking at two things. we're looking at the labor market and inflation. and so headline inflation last year was 2.6%, and we've said, assuming the labor market remains solid and strong, we want to see further progress. we didn't actually make much progress on core pce inflation last year for reasons that i can explain, but nonetheless, the progress wasn't there. so we want to see a resumption of progress. i'm not going to put a really specific number on it. i mean, the truth is the economy's strong, the labor market's solid, and we have the luxury of being able to wait and let our restrictive policy work to get inflation coming down

again, and that's what we're doing. >> is there any concern that the fed that deporting millions of undocumented workers that do a lot of crucial work in the agriculture industry and construction, in the hospitality business will create upward pressure on inflation in this country? fed chair powell: so we don't, you know, we don't have concerns about policies. we just look at the data and, you know, labor supply has actually the new labor supply from immigration has actually come down quite sharply over the second half of last year and there's every reason to think that will continue. demand has also come down so that the unemployment rate has actually been flat since july. >> but wouldn't taking a million workers out of out of the out of the economy have a direct impact on it. fed chair powell: it could. we'll just have to see how supply and demand match up. in any case, we don't, you know, we're not, we're not here to

comment on immigration. we're here to achieve, right? >> no, i totally get that. i'm just figuring if you take a million people out of the workforce, how do we make that up and how would that have an upwardly inflationary pressure on our economy? but moving on, recently, the cleveland cleveland fed's new tenant rent index tumbled to a negative 2.4 year over year rate. does that type of deflation and shelter make you more positive on future interest rate cuts? fed chair powell: so yes, but the thing is, it's what we're really looking at is in the aggregate housing services inflation, that's, i believe that's a measure of current rents, so market rents that are happening, and market rents have not been showing much inflation for a long time. market rents don't make their way into rents until leases turn over, existing leases turn over, and that's been the slow part of the process. we have seen a lot of progress on that, but we're not there yet. we're not back to levels of of housing services inflation, which is what i described, but we're getting there. we're making clear progress.

>> you recently said that employment prospects are solid, and construction employment, which represents 6.1% of all private employment, is falling significantly. does this concern you? fed chair powell: so we look at the aggregate numbers. there are always industries that are growing and not growing. i think the last few job reports have been have been significant job creation. you saw the one here a week or so ago which revised up the last two months and strong job creation. in fact, it looks like the job creation may actually have picked up a little bit around the end of the year. >> thank you. and just very briefly, given what we, what we had in had a business kpe recession the last time the economy faced uncertainty with large tariffs. are you monitoring kpe developments closer this time around? fed chair powell: we're monitoring them carefully, yes. >> thank you. i yield back. >> gentleman yields back.

>> thank you, mr. chairman, and thank you very much, chairman powell. good to see you. i did recently chair an oversight subcommittee hearing and during our hearing, we revealed evidence that the fdic directly pressured banks to debank crypto. what do you think of that situation? fed chair powell: so it's, i think we're all struck at the number of complaints and the breadth of them, and you know, want to understand we want to take a fresh look at this at this area. it's not something we're not telling banks that they can't bank certain people from certains anything like that. nonetheless, we're hearing these things, and i take at least some of it is real. so we need to, we need to understand it. and stop it from happening because, and you know, if you look at what the banks are saying they're really saying that a lot of this is that the enforcement of any money laundering is so tough that at any sign, any flag at all that gets raised, they just cut people off and they don't, and they can't explain so that may

be part of it, but i think we need to do some work, get to the bottom of it and address this. thanks there were hundreds of letters, by the way, that were pretty clear that banks should avoid doing business with crypto companies. no such pause letters as they referred to or communications of this coming from the fed. fed chair powell: not that i'm aware of. no, it's not been our policy. our banks are, you know, are doing business with crypto companies and they're doing crypto inside the banks. some of them are. we've been a little bit careful with it, but we, i really don't think we've been telling people they can't do it. >> i think a lot of people, including us, would appreciate you keeping doing a careful review of that. the banking industry itself is concerned that there's no vice chair of supervision to provide clarity on multiple issues from basel iii to regii and the banking. do you expect to have an acting vice chair of supervision, and when do you expect to have an acting? -- acting vice chair? fed chair powell: we don't have, we need to have a confirmed vice

chair if we're going to have a vice chair. there's no such thing as acting for us, but, but i don't know. it's up to the administration. i'll tell you the way we look at it is we're going to do our jobs, and i think there are a number of things that can be done that'll be very constructive. and you know, if there is a new vice chair for supervision, i will welcome that person and do everything i can to make them successful. >> ok, thank you. >> yesterday you noted that basel 3 endgame could be finalized fairly quickly. given last year's extensive public comments. will you ensure the rule does not restrict access to capital and fully incorporates industry feedback? and as you stated, you felt that the capital reserves for banks was about right. so i'd imagine you're not looking for anything too drastic there. fed chair powell: no, that's right, yeah, that's correct. >> ok, great. so the cpi this morning came in a little hotter than expected at 3%. did this surprise you? fed chair powell: it was the cpi reading was above almost every forecast, but i would just offer a note of caution on this, two

notes of caution. one is we don't get excited about one or two good readings and we don't get excited about one or two bad readings. the second thing though is we target pce inflation because we think it's simply a better measure of inflation. and so you need to know the translation from cpi to pce, and we get more data on that tomorrow we'll get the producer price index. so i think it's always wise and you know, the people who follow us closely know this we know actually what the pce readings are, you know, late tomorrow. >> ok, so in the past, as you well know, you called inflation transitory. then the fed signaled 3 rate cuts for 2024 and the market's priced in 6. now that you're saying that there's no rush to cut rates. do you find this forward guidance stabilizing markets or fueling volatility? fed chair powell: so this is the the summary of economic projections, the dot plot. and you know, i mean, i think

markets like it. it's, it's kind of the only, it's the, it is the forward guidance that we give. we don't really mean it as forward guidance, but markets do take it sometimes they take it too seriously. i think most market participants understand that it's highly conditional and dependent on what actually happens in the economy. >> and that's the feedback that you do receive >> fed chair powell: yes. and when we talk about getting rid of it, market participants will tell you, please don't do that, ok. >> if doge found $1 trillion in wasteful unnecessary spending, the department of government efficiency, of course, and wouldn't that have a positive effect on inflation, allowing you to perhaps lower interest rates and of course reduce our deficit spending? fed chair powell: so this is if if $1 trillion of spending were eliminated. you have to run that through a model, but i mean, ultimately it would, you know, hard to say exactly how it would affect the economy. >> you've got a $6 billion budget at the fed. would you welcome doge to have a

look under the hood? fed chair powell: you know, i, we haven't heard from them, and i've got nothing for you on that today. >> thank you, chairman. i yield back, chairman. >> the gentleman's time has expired. the gentleman from illinois, mr. castan, is recognized for 5 minutes. >> thank you, mr. chair. chair powell, always a pleasure to see you again. i want to start. there's, and i don't expect you to comment on the policy here, but there's been a number of actions from the trump administration of scrubbing or limiting data that the private sector has historically relied on to understand. the direct and indirect impacts on the economy, public health data, you know, information about breaking things down by gender, by race, that we need to understand granular shifts in the economy. i realize that you don't rely exclusively on government data, but has there been anything that has happened since the trump white house was sworn in that has limited the fed's access to information you need to fulfill your, your dual mandate? fed chair powell: not, not that

i'm aware of, no. >> if, if there was, will you commit to sharing it with congress so that we can fulfill our oversight responsibilities? fed chair powell: sure. >> ok. when you were here in july, i'd ask you this question. i just want to confirm that you still feel the same way. is it still your view that the federal of the federal reserve that climate change constitutes an emerging threat to us financial stability? fed chair powell: i guess i would say it this way. i wouldn't say that climate change is currently a threat to us, an emerging threat. i would say that it may emerge over time as such. >> ok, so $250 billion of losses in california. we've now got multiple states where the insurer of last resort is insolvent. i'm reporting today that california is having to bail it out. i know we have a difference of opinion on ngfs. i don't want to go into that, but is the fed monitoring what is happening to our financial system? as those insurers pull out as insurance rates go up and people's both access to property

insurance and the cost of insurance are going up, are you monitoring what's happening systemically in our economy as a result of that? fed chair powell: yes, the question though, if the question is, is it a threat to the financial stability of the united states, that's really the question. and of course we're following that very, very carefully. >> ok, so if, if a what if you're monitoring it, where is the risk that was being backed by the insurance industry moving. where in the economy does that risk now live? fed chair powell: so insurance companies, as you know, can cancel policies and not issue them, and they can leave states, and they're doing a lot of that. so where does that, where do those risks fall? they fall on homeowners and and other beneficiaries, and they fall on state governments and to some extent the federal government, but they don't fall on, they don't, they don't cause large financial institutions to fail. >> are you seeing shifts in mortgages, mortgage servicers, their willingness to provide loans to homes as those insurance rates go up? or disappear? fed chair powell: implicitly if you can't get insurance, then there won't be a mortgage.

so i can't point to episodes where that's happening, but that's, that's certainly where this looks like it's headed. >> ok, because i mean there have been reports going back several years now that the more prone your property is to flood risk, to fire risk, the more likely you are as a bank to offload that onto fannie and freddie, right? we've, we've seen that data happening, so that then raises the question of, and this is maybe just purely academic and wonky. if you own a set of cash flows and you want to sell them to me, and we both have full information. i'm only going to buy them from you in a creative value to you to the extent that i have a lower cost of money than you do, right? just, i mean, sort of like econ 101, right? so if we own fannie and freddie right now because they're in receivership and they are throwing off a string of cash flows to the treasury, setting aside the nuances of how the cbo scores all these sorts of things. isn't the sale of fannie and freddie on the assumption that the buyer and seller have perfect information, the same information on both sides of that transaction?

if that's accretive to the american taxpayer, doesn't that implicitly assume that we have to sell to somebody with a lower cost of capital than we do? fed chair powell: that's, i followed your logic there, yeah, >> ok, and that would only not be true to the extent, i suppose, either that the buyer violates every rule i had in my m&a career of paying for upside, as they say, or that the buyer lacked information that the seller had. right? fed chair powell: fair. >> ok. so what i'd like to understand from you is, does that create a conflict of interest for the united states government? because if we have if we have information about climate change being scrubbed from our data sets, and we have a white house that would like to sell fannie and freddie. are we committed to efficient markets that depend on accurate transparent information, or are we committed to making a quick buck, in which case we might want to have, we might want people not to be uninformed?

is the fed committed to transparent markets, i guess is the first question. and, and then the second one, do you feel that conflict? fed chair powell: i think we're getting a little away from my from our mandate at the fed. i mean, the idea of privatization is to get private, get this off the balance sheet of the of the fed and get it into get private capital backing it up. >> sure, and there would be good reasons for that. but if that if that is coming at the expense of value to the american taxpayer, we need to be transparent about that, right? fed chair powell: but we have private sector banks, you know, we could make all credit, all credit could be made cheaper if offered by the central government. >> gentleman, yields back, the gentleman from south carolina, mr. timmons is recognized for 5 minutes. >> thank you, mr. chairman, and thank you to chair powell for joining us today. yesterday in an exchange with senator warren on stress testing, you said that the fed is having to change their approach quote because the ground has shifted very

substantially in administrative law, end quote. and while yes, the ground has certainly shifted since last year, i'm slightly confused because after reading up on the banking industry's lawsuit against the fed, i do not see a direct connection between their case and the loss of chevron deference. their case seems to center on the fed not complying with the long established process laid out by the administrative procedures act. and while some at the fed may not classify stress tests as a rulemaking, when they require banks to alter their capital levels, they have the effect of rulemaking. so chair powell, i'm hoping you can clear this up for me. is this a matter of adapting to a post-chevron world, or was this the fed unlawfully using stress tests as a backdoor to increase capital requirements on banks without issuing a formal rulemaking and having to go through the legally required notice and comment apa process? fed chair powell: pretty good chance that the next sentence i say would be evidence in the court case that we're having. so i'm not going to, i'm not going to get into, you know, just debating what the law is because we're in litigation. i will say it's not just chevron though. i think it's clear from other

cases that expectations under the administrative procedure act are also are also raised just generally speaking, and so we felt that like overall that really has changed the playing field. >> ok, any changes in capital requirements is very disruptive, and having a more predictable process is helpful for the long term stability of the us economy. on to the next question. so foreign banks, many of which are smaller than their domestic counterparts, play a larger role in providing financing in the treasury market. us banks, on the other hand, are less involved than they could be, primarily because regulators have made this activity less profitable for them. stricter capital requirements, liquidity buffers. and compliance costs stemming from regulations like dodd-frank make it more costly for us banks to engage in treasury market operations, particularly in repo and securities lending. as a result, foreign banks facing fewer regulatory hurdles have stepped in to take on this crucial role, providing the liquidity and financing needed. this shift has significantly altered the market landscape with foreign institutions now holding a larger share of

financing operations that were once dominated by us banks. so my question is. -- my question is this. why are we setting up a system where the us treasury market needs to rely on so much on foreign banks for proper functioning, and do you see that as a national security threat? fed chair powell: the trend that i see is that we have very significantly raised the capital costs of supporting market activity, and especially for low risk activities that are low risk, low return. what's happened is the amount of treasury has vat grown much greater than it is now much greater than the capital that's allocated to intermediates. so that's why you see low intermediation. and relative lack of liquidity, and i think it's appropriate to do something about that, and that's something that we're we'll be looking at is to reduce the enhanced supplemental leverage ratio to account for that. this is something that we proposed before which i think is intended to increase liquidity in the capital markets for banks

subject to it. >> thank you for that. i want to end on a positive note. i want to discuss the optimism among the american public. small business optimism experienced its largest increase in 40 years following president trump's recent election, with continued positive momentum in the months since. this surge reflects growing confidence in the economy, spurred by expectations of favorable policies and reduced regulatory burdens for small businesses. the index is not only well above its 50 year average but also reached its highest point in december since late 2018. this shift has caught the attention of many across the economic landscape. back home in south carolina, i frequently speak with small business owners who are enthusiastic about the future and eager to help their businesses thrive under the new administration. so my question is this. how do you see this significant jump in optimism translating into tangible outcomes in terms of investment, hiring, and overall growth for small businesses? fed chair powell: so we know that sentiment really matters. it's really hard to model it, but you do think about it when you're thinking about your

forecast. you think about, you know, optimism and that kind of thing, because that's what supports investment. all the investments that companies make, you know, they have to have on some level optimism that it's worth shelling out this money to do what it is they're doing. so it's a key part of how the economies work. >> and given the potential for increased investment, are there specific policy adjustments or economic factors that you're watching closely to ensure that this optimism leads to sustainable growth in the long term? fed chair powell: the best thing we can do is achieve price stability and also full employment, maximum employment, and then create a stable environment where businesses and households can not worry about inflation, and we have steady sustainable growth. and as one of the millions of americans about to get a mortgage, interest rates going down would be helpful. thank you, mr. chair. i yield back. >> the gentleman yields back. the gentlewoman from massachusetts, ms. presley is recognized for 5 minutes. >> chairman powell, we're at an inflection point, and we need leaders who are courageous

enough to speak truth and who are committed to helping every person who calls this country home. there are many who wrongfully justify trump's presidency and the lawless work of doge as good for the economy. well, chairman powell, you actually know something about the economy. the federal reserve has a dual mandate maximizing employment and stabilizing prices, and it is clear to me that donald trump and elon musk's actions are impeding your work. the threats of tariffs against our allies are not helping the fed do its job, nor will they help people across our country. the boston federal reserve put out a report last week which estimated tariffs would be inflationary and raise prices. chair, i ask unanimous consent to enter into the record the report titled the impact of tariffs on inflation. additionally, donald trump has threatened mass deportations. he seeks to terrorize immigrant communities and separate families, claiming it will help the economy.

i don't think so, and neither does the peterson institute for international economics, who estimated that employment would drop 7%. chair, i ask unanimous consent to enter into the record the report titled mass deportations would harm the us economy. >> without objection. >> now, chairman powell, i want the federal reserve to be successful. so if elon musk and his doge bros were to walk into the federal reserve, intimidate staff, access classified data, and take control of the agency the same way they did usaid and the consumer financial protection bureau, would that help or hurt our economy? fed chair powell: we don't have that happening. i'm not going to speculate. >> well, on your own website, it says, quote, the federal reserve is accountable to the public. and the us congress.

unquote. so i would like to see a clear answer on this. your staff are watching. wall street is watching. donald and elon are certainly watching, and we all want to know what is your view if doge does to the federal reserve what it has already done to other independent agencies. fed chair powell: my, my, what we're going to do at the fed is keep our heads down and keep working, wait to see what new policies emerge and try to make a thoughtful, sensible set of policies on our part once we understand the implications of those. >> if elon musk or anyone from doge attempts to access the federal reserve's private data, will you immediately alert the members of this committee. fed chair powell: sure. >> thank you. this is as clear to me as night and day. donald trump and elon musk are

not trying to help working class people. they're trying to help themselves. they want the fed to be a tool that helps the rich get richer. banks get bigger and regulations disappear altogether, but that is not your mandate. the fed must maintain its independence and integrity, put the interests of the public before elon musk. the world's richest man does not care about the price of eggs. he doesn't have to. when he has already bought the presidency. i yield back. >> the gentlewoman yields back, the gentlewoman from california, ms. kemp. she recognized for 5 minutes. >> thank you, chairman hill and chairman powell, thank you for joining us today, and i want to commend you again for ignoring the outside noise and staying true to the fed's dual mandate.

chairman powell, it seems the advent of artificial intelligence and other emerging technologies has helped the united states increase productivity when compared to other countries around the world. that makes our country more competitive and envy of economic growth. so do you believe that this boom in productivity is sustainable in the long term? and if so, how does that increase in productivity affect your models to forecast inflation, therefore monetary policy? fed chair powell: we have had a boom in productivity. it is most welcome. and of course it would be great if it were sustained. i think if you look at the candidates that try to explain it, some of them are kind of one time things and some of them could be more sustained. you mentioned technology and ai. to the extent that's part of it, that could be a sustainable increase in the rate of growth and productivity. to the extent it was more about job reallocation, people switching jobs coming out of the pandemic, that's kind of a

one-time thing. also, we had a wave of startups, a wave of early stage companies, you know, startups that also tends to be linked to productivity. that too could just be a one time increase in productivity. literally no one has the record of being able to successfully forecast productivity for very long, but again it's, it's, it's going to depend on many things, and it's as long as we have this increased productivity, it's, it's most welcome and important. >> thank you. over the past decade we've seen fed intervene with more regular frequency to maintain the orderly functioning of the us treasury market much more than decades before. it seemed like the private sector was able to manage this without too much fed intervention pre-financial crisis. and a long standing and growing bipartisan consensus that the slr and other regulations may be causing this.

if so, what do you think the solution is to reduce the need for frequent fed intervention? fed chair powell: so i do think we need to work on treasury market structure, and part of that answer can be, and i think will be reducing the calibration of the supplemental supplemental leverage ratio as you mentioned. that's something that i have long supported and for the reason that you know, the quantity of treasuries has grown really significantly, and the capital allocated to intermediating trades in treasuries has not, in fact, has shrunk, so we, we need a liquid treasury market, and this is one of the things that we can and should do is to is to reduce the calibration of that measure. >> thank you. i want to go back to march 2023 in response to the fallout of silicon valley bank. it is my understanding that the fed is analyzing ways to create

a more efficient process for financial institutions to access. the discount window. one issue that has come up is that it can take extended periods of time to assess and determine the lendable value of collateral, potentially denying the institution's ability to access liquidity quickly. is the fed looking at ways to streamline the process to assess and determine the value of collateral at discount window? fed chair powell: we are, we are looking at, so there are sort of impediments to the efficiency of the discount window, and those are things we can work on and we're working hard on. there's also the question of stigma though that banks are reluctant to use it because of the so-called stigma of using it, and that is a very hard problem to solve. we're also working on that one. >> and regarding the fat review of the discount window operations, can you give us an update on what problems the fed was able to identify, what solutions you are pursuing, and what the estimated timeline is for any action?

fed chair powell: so the study is ongoing right now. the work's ongoing, but you know, essentially you touched on some of this. it's inefficient, it's slow, and we need to, we need to have collateral. you know, processes that are very quick and very efficient because they need to be quick and efficient in a crisis. so that's that's part of it. just general modernization, investing in technology, modernizing the discount window. that's part of it. the harder part is really turning it into something that banks are comfortable using because they feel it's not stigmatized, and we're working on that too. >> you know, the opening the discount window 24/7 could really help the banks in california, especially in the state that i represent, the southern california that i represent. thank you. >> thank you, gentlewoman yields back. the gentleman from new york, mr. torres, is recognized for 5 minutes. >> thank you, mr. chair. president donald trump has been asserting among the most

aggressive and expansive claims of presidential power that we've seen in our nation's history. he's taken the unitary executive theory to new extremes. he's claiming to have the authority to defund whatever agency he wishes, to abolish whatever agency he wishes, and to fire whomever he wishes, even if it means violating an act of congress. mr. chairman, suppose for a moment the president were to ignore the congressional statute that establishes the independence of the federal reserve, what economic consequences would result from the fed losing its independence? fed chair powell: i think you know research over many, many years and many, many jurisdictions shows that some degree of independence is very important in keeping inflation under control, and the connection is obvious. if politicians are going to want to be re-elected and things like that, they're not going to be focused on the longer term. we have the mandate to remain separate from all of that, to stay out of all of that so that we can just focus on not on

election cycles or helping or hurting any any political party or politician, but just on serving the public as a whole. that is essential and you know it's uniform, i think across all advanced economies, central banks. >> much like the bureau of fiscal service, the federal reserve has highly sensitive payment systems. president trump and secretary besson granted elon musk and his team of outsiders access to the central payment system of the federal government, a system that is often described as america's checkbook. would you, as the federal reserve chair, ever grant a team of outsiders access to the fed's central payment system without sufficient vetting and sufficient security clearance? fed chair powell: well, no, but let's remember we're we're the treasury's fiscal agent. everything we do is under their direction, and we, there, there are, there are treasury payment systems, and then there's our side of the wall, which is the actual payment to the recipients. and so we control access to that

very, very carefully. >> the treasury issues the payments and then you process them. fed chair powell: they order us to pay someone and we just pay. we don't have any, we don't. you know, we don't question payments. we just make the payments and we control access to those payment systems very carefully. >> and what would be the danger of lightly granting access to the fed's payment system to outsiders without sufficient vetting? like what could go wrong? fed chair powell: well, the reason why we're so careful about it is is just for one thing, the possibility of mistakes and someone coming in and changing the code and things like that. so we have very careful access. another one is just you open it up to more cyber risk and things like that. so i mean i think all you know, really important computer programming is subject to very, very careful access restrictions, and we're no exception. >> right, so you believe as i do that granting an insufficiently vetted team of outsiders access to the payment systems of the

treasury or the fed would radically raise the risk of a cyber breach at the hands of foreign adversaries like china and russia. fed chair powell: so i, you know, we're talking hypothetically here. i can tell you that that that is not something that's happened relative to we can speak to the systems that the treasury has asked us to operate on their behalf, and that has not happened in those systems. >> i represent one of the poorest congressional districts in america. i have cash-strapped constituents who pay exorbitant fees simply to transfer their own money often to loved ones abroad. access to fedwire could play a role in radically reducing the cost of remittances and payments for the lowest income americans. what is your position on expanding fedwire access for the purpose of reducing the cost of remittances and payments? fed chair powell: so we do --

fedwire is really between banks. these are very large wholesale transactions. it's one of the world's most important, if not the most important, financial market utility. i don't think we're looking to open it up to you know, to retail customers, i think, you know, faster retail payments and particularly cross border payments are a subject of a lot of work in the international sphere, and i think we all understand it's important to lower the costs and the risks of those. >> the commercial real estate, is that, do you feel that continues to be a ticking time bomb within the financial system? what's your, what's your sense of -- fed chair powell: i wouldn't say that, you know, so we've been saying, and i think it's still true that this is a problem that's been with us and it's going to be with us for a while. if i can say something modestly constructive, it doesn't seem to be getting worse. so we have, there are a lot of embedded losses, a lot, and they're just going to need to be realized. so we're working with financial institutions to make sure they have a plan and understand their losses and can manage them. >> i see my time has expired. thank you. >> the gentleman from florida,

mr. donalds, is recognized for 5 minutes. >> thank you, mr. chairman. chair powell, good seeing you again. i want to start with just a broad-based conversation. i know the fed has been making adjustments to the fed funds rate over the last several months, and what we've noticed is there's not been a lot of, although there's been movement on short term rates, there really has been. a minimal impact on, in my view, intermediate to long term rates. would you, can you expound on why, why you think this phenomenon is starting to exist with respect to federal monetary policy versus the general borrowing rate, borrowing rates for businesses and consumers, fed chair powell: you're right, of course we've lowered the federal funds rate and as sometimes happens. a longer rates have gone up. they've gone up and come down and gone back up, you know, they moved around, but they're very higher, and the reason is that, you know, we don't control long term rates. they react to a whole bunch of different things including a sense of more deficit spending coming, including expectations of more growth and of risk, risk

of higher inflation, but not. so markets aren't pricing in higher inflation, but maybe pricing in that the risk of that is there, and that could be a reaction to new policies or not. but ultimately though, the increase in longer term rates is really mostly not about fed policy or our job of maintaining price stability. it's about other things, the term premium in particular. i'd be happy to meet with you and go through this in a lot of detail more than you can do here. >> no, i would love to do that. one of the concerns i have, as well as a lot of my colleagues up here on the hill, is there is but so much that the fed can do with respect to rate policy, and i fully acknowledge that wanted to get your views on that, but i think it's also the desire and this conversation happening right now. obviously with doge and elon musk and the desires for efficiencies but then also uh stability in federal spending

and even bending the cost curve and fiscal policy from capitol hill, do you think that would have yield positive results in medium and long term rates borrowing rates not just for the federal government but for the american consumer. fed chair powell: when you say fiscal policy, you mean fiscal policy that would reduce deficits over time. >> yes, fiscal policy that will reduce deficits, fiscal restraint. i would say fiscal common sense over the intermediate and long term for the united states. fed chair powell: yes, well, so i think part of, part of what market participants think about when they buy our treasuries is. how much more of this is coming? are we going to get on a sustainable path and they want to get paid. if the answer to that is, well, we don't have a lot of confidence in that, then they're going to need, so the term premium, the so-called term premium goes up for that reason. and there's no question if if we were on a more sustainable path, i do think rates would be lower. >> no, and i appreciate that testimony because one of the things that while we do talk

about obviously tax policy and another committee regulatory policy throughout the entire federal government. i think it's important for the american people to know that washington does have to be fiscally responsible and if we are not, and i say all of washington, if we are not, then the risk premiums, so to speak, for borrowings in the marketplace are going to increase, not because of the american consumer. not because of the strength of the american engine, but simply because the amount of treasuries that we are putting out to market are just demanding a higher premium for every new dollar that we borrow because simply people want to be paid back. it's just something where chairman, you don't have to comment on that just something i think is important for the american people to understand that is the major issue if you will, over the next 20 years, 10 to 20 years for the federal government that we have to get our fiscal house in order if we're going to give the american consumer who might be poor, trying to make a way in this country, middle income,

trying to, you know, just take care of their children and figure out what the next stage in life is is going to look like, people who are in the upper middle class who are now forming businesses, building some real wealth for themselves and for their family, all of that is at risk. if the united states government does not take its fiscal health as serious as any other family and any other business would do, real quick, chairman, you said yesterday that as long as you're chairman, the us will never have a central bank digital currency. is the federal reserve or any of its member banks currently conducting any studies on cbdcs either for retail or wholesale purposes? fed chair powell: i mean, we're not doing any work that is designed to lead to a retail cbdc. that's just, that's not happening when we don't, we don't support one. we don't have legal authority to do one. so no, the notion of a wholesale cbdc is really not one that we think about or accept, you know, we have take fedwire.

fedwire is a real time, you know, digital process of trillions of dollars every day between between banks. is that a cbdc? >> the gentlemen's time has expired. >> gentleman yields back, the generalwoman from texas, ms. garcia is recognized for 5 minutes. >> thank you, mr. chairman and chairman powell, thank you so much for being here today. it's always a pleasure visiting with you. i'm going to talk about a topic that both congressman gonzalez and representative presley brought up, which is something that i think does impact our federal economy, but i know certainly does impact my district in texas. i'm really concerned about president trump's mass deportations efforts and their impact on your dual mandate. i believe the last time you were in front of this committee, i asked you about the impact immigration had on monetary policy given last year's congressional budget office estimates.

as a reminder, the report estimated that the labor force in 2033 will be larger by 5.2 million people, largely due to the immigration surge. since then, there have been more reports and research about the impact the economy, the immigration has on our economy, both in maximizing the employment and stability in our prices. for example, example, immigrants are fulfilling lower paying and oftentimes dangerous jobs more frequently than us born workers. they earn more money, pay taxes, invest back in our economy for everyday goods and services, and help create even more jobs. a study done by the national academies of science, engineering and medicine found that foreign born workers are, as some people say, immigrants, pay 237,000 more in taxes over their lifetime than they receive in benefits. let me say it again, $237,000

more. so these mass deportations will have a massive impact on both our economy and workforce, leading to a drop in production and spending. we're already seeing some of that in my district, chairman powell. i recognize that the federal reserve does not weigh in on policy, and so before you say that in your response, i already know that. however, immigrants impact our economy, does impact both the unemployment and price prices, as representative gonzalez detailed in terms of some of the work that they do. does the federal reserve account for immigrants in its in its interest rate decisions? fed chair powell: indirectly, yes, so we're looking at looking at the labor market, and part of what drives growth in the labor market is population growth, and part of what drives population growth is immigration. so sure it can matter and sometimes it matters a lot,

right? >> and do you look at the consumer price index in terms of the immigrants as consumers? and if they're afraid to go out because they may get deported, they're buying less. that's what i'm hearing from businesses in my district. fed chair powell: i think things like that would show up in the aggregate data, but we don't, we don't single out any particular group for that. >> ok. so can you quickly list some of your federal reserve responsibilities, and do you have capacity to assume the role of being our consumer watchdog as the president now is focused on getting rid of the consumer financial protection bureau. fed chair powell: so before dodd frank, the occ, the fdic, and the fed all conducted consumer exams and enforcement. for the banks that they regulate and supervise, so for us it's

state member banks and for the fdic state non-member banks for the occ national banks. dodd-frank took all banks over $10 billion in assets away just for purposes of consumer examinations and enforcement, gave them to the cfpb. statutorily, you could give that back to us or not, but you know it's certainly possible to restate the old order, but that would have to be something that -- >> no, i realize you've also said that you know you will. your team will be there to get the job done. you've got your nose to the grind. fed chair powell: we sent a bunch of people over to cfpb. we would need those people back, you know, we don't have the people now who could take that over. they moved many people from the fed and the occ and the fdic, so there would have to be a reallocation of resources. >> yes, ok. all right, so, so it sounds, sounds like you're, you're, you're obviously willing to do it and we may have to convince the president to make that reallocation of resources.

so thank you for that, and mr. chairman. now i'd like to ask for unanimous consent to submit for the record 3 articles. one, the brookings on the labor market impact on deportations, and the other the federal reserve bank of dallas migration to texas fills critical gaps in the workforce, and the second one on unprecedented immigration search boost job growth without -- and i yield back with 2 seconds. >> the gentlewoman yields back. last member to question the chairman today will be the gentleman from new york, the vice chairman of the subcommittee on capital markets, mr. garberino, and you're now recognized for 5 minutes. >> thank you, mr. chairman. chairman powell, it's good to see you again. after the last open market committee meeting, you said that the labor market conditions remain solid, unemployment has stabilized, and conditions in the labor market are balanced. this comes on the heels of the jobs report this past friday that indicated the economy added 140,000 jobs during the month of january. yet when you peel back this data and look at recent employment

data for the smallest of small businesses, the mom and pop shops, the firms without not with 100 employees like those included in the jobs report, you see that small businesses are actually consistently losing jobs. in fact, the latest intuit quickbooks small business index showed that employment for us small businesses with 1 to 9 employees decreased by 42,000 jobs compared to january. last month in my home state of new york, small business, small business employment decreased by 0.33% and revenue decreased by 0.62%, which is a decrease of $350 per small business on average. do you believe that we are seeing the same economic and business trends between companies with fewer than 10 employees and larger companies? fed chair powell: i guess not. no, i mean, i think it's, it's always the case that there are differences between sectors and size companies and all that and you know we're really left with looking at the aggregate numbers. >> do you do you take into account the current macroeconomic trends of small of

the smallest of the small businesses when setting policies? fed chair powell: we do. yeah. i mean, we, for one thing, we read the same data you do. the reserve bank presidents come and talk about their districts at length, and they talk about if you read the beige book, they're going to talk about small businesses, you know, nonprofits, everything. so we look, we look at everything, but at the end of the day, you know, there's only one national unemployment rate, but there are many, many subtle changes in the data that we monitor too. >> and we all know small businesses drive the economy, and i know i, you know, there's a company in my district, brinkman hardware, 40 years ago they started with less than 10 employees. now they have over 200, so they are able to grow and they do great work. but i think just making sure monetary policy really does focus on, on helping small businesses grow is is key to making sure the economy continues to grow. i'd like to move on to a topic that we've discussed on a few different occasions, basel 3 and game. it is well known that i had some serious concerns with the initial proposal. one of those concerns that we haven't discussed is how the proposal would have impacted the

securitization framework. at the time of the proposal, there was no narrative, explanation, data, quantitative analysis, or financial modeling rationale for why the p factor was doubled. while i understand that mr. barr promised we'd see an economic analysis to support the proposed change, i believe that was never released. so chairman powell, i'm wondering, in your opinion, have you seen any market pressures or changes that would have necessitated such an increase in the p factor? fed chair powell: i can't point to anything. i will say that, you know, we're going to look at all of that again when we when we get together again with the other agencies and try to move this forward. >> ok, well, the proposed doubling of the p factor would significantly increase the amount of capital required for securitization exposures, making securitization more expensive for banks to participate in and raising the cost of limiting the availability of credit for households and businesses. i appreciate that you will look at that. but given how this proposed change may negatively impact a bank's ability to act as market makers in the securitization

markets, when looking at this again, like you just said you would, can you commit to review this substantial increase given its outsized impact. fed chair powell: sure. >> i appreciate that, chairman. and i just want to expand on one other topic that my colleague representative lucas brought up earlier. over the past decade, we've seen the fed intervene with more regular frequency to maintain orderly functioning of the us treasury market, much more so than decades before. it seems like the private sector was able to do to manage this without too much intervention pre-financial crisis. do you think regulation like supplemental leverage ratio, which some of your colleagues have commented on, is causing this? and if so, what do you think the solution is which will reduce the need for frequent fed intervention? fed chair powell: i think part of the answer is going to be to reduce the calibration of the supplemental leverage ratio. that's there are a number of things that probably need to happen with treasury market structure, but that's one of them. >> that's one of the solutions.

but do you think there's other things and you'll all work on that? fed chair powell: i do, yeah. >> ok, i appreciate that, chairman. thank you very much for being here today, and i yield back. >> gentlemen, yields back. i want to thank chairman powell for being with us today. thank you for your testimony. without all objections, all members will have 5 legislative days to submit additional written questions for the witness to the chair. the questions will be forwarded to the witness for his prompt response. chairman powell, please respond no later than march 30th, 2025. this hearing is adjourned. [captions copyright national cable satellite corp. 2025] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] >> c-span's washington journal, our live form involving you to discuss the latest issues in government, politics, and public policy. from washington and across the country. coming up thursday morning, wyoming republican congresswoman

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